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
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The Federal Reserve's narrowest definition of the money supply is
a. M0. b. M1. c. M2. d. M3.
Refer to Figure 19-8. The equilibrium exchange rate is at A, $1.25/euro. Suppose the European Central Bank pegs its currency at $1.00/euro. At the pegged exchange rate,
A) there is a surplus of euros equal to 700 million. B) there is a shortage of euros equal to 500 million. C) there is a shortage of euros equal to 200 million. D) there is a surplus of euros equal to 300 million.
Why were the U.S. government budget deficits of the 1980s and early 1990s so unusual from a historical point of view?
A) It was the first time the U.S. government had ever run deficits. B) In the past, deficits were usually that large only in wartime. C) It was the first time that deficits were accompanied by very high rates of inflation. D) It was the first time that deficits diverted funds from other productive uses, such as investment in modern equipment.
The holdout problem occurs when _____
a. unanimity rule is required for any Congressional action b. free riding is prevalent c. individuals drafted into the military refuse to report d. any individual has the power to prevent collective action