Based on the figure below. Starting from long-run equilibrium at point C, a tax increase that decreases aggregate demand from AD1 to AD 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. D; B
C. A; B
D. B; C


Answer: B

Economics

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The demand curve facing a firm shows the

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If the government increases defense spending by $1 billion and the MPC is 0.8, how much additional spending will occur in the third “round” of spending?

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There is an opportunity cost associated with

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Economics