Based on the figure below. Starting from long-run equilibrium at point C, a tax cut that increases aggregate demand from AD to AD1 will lead to a short-run equilibrium at point ________ and eventually to a long-run equilibrium at point ________, if left to self-correcting tendencies. 

A. D; C
B. B; C
C. B; A
D. D; B


Answer: D

Economics

You might also like to view...

Refer to Figure 10-3. Which of the following is consistent with the graph depicted above?

A) The government runs a budget deficit. B) An expected recession decreases the profitability of new investment. C) Taxes are changed so that real interest income is taxed rather than nominal interest income. D) Technological change increases the profitability of new investment.

Economics

The Three Key Federal Reserve Entities

What will be an ideal response?

Economics

Economic cost is always less than accounting cost.

Answer the following statement true (T) or false (F)

Economics

If a company has a cost curve of TC = 300 + 2Q + Q2 and it produces 300 units per day, then its marginal cost is

A. $600. B. $2.02. C. $602. D. $1.

Economics