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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In an open economy with strong international trade, increases in government spending are likely to have an overall "crowding out" effect
Indicate whether the statement is true or false
When the Fed uses contractionary policy,
A) it causes inflation. B) the price level rises higher than it would if the Fed did not pursue policy. C) it does not change the price level. D) the price level rises less than it would if the Fed did not pursue policy.
Refer to Figure 27-8. In the graph above, suppose the economy in Year 1 is at point A and is expected in Year 2 to be at point B. Which of the following policies could Congress and the president use to move the economy to point C?
A) increase income taxes B) decrease government purchases C) increase government purchases D) sell Treasury bills
For the period 1947-2012, employment in the United States was
A) procyclical and leading. B) procyclical and lagging. C) countercyclical and leading. D) countercyclical and lagging.