What would be the economic impacts of a decrease in the tax rate for all tax brackets? Use the idea of aggregate demand your answer.

Using the concept of aggregate demand as a formula of Consumption (C), Investment (I), Government Spending (G) and Net Exports (X-M), we have the formula of AD= C + I + G + (X-M). An decrease in taxes for all tax brackets would lead to an increase in inflation. This occurs due to a decrease in taxes leading to an increase in the amount of discretionary income that an individual has. Using the concept of consumers aiming to maximise utility, which is gained by the purchasing of goods, consumers would spend more money on luxury goods that they may not have been able to previously afford, assuming that the YED > 1, where a decrease in tax is equal to there being an increase in income. This leads to an increase in the C component in AD, leading to a rightward shift of the AD curve, leading to an increase in the price level from P1 to P2, representing an increase in inflation. A diagram would be provided if necessary to clearly show the understanding of the questioning, and I could provide this on request.