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
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Based on the figure below. Starting from long-run equilibrium at point C, a decrease in government spending that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at__ creating _____gap.
A. B; no output B. D; an expansionary C. B; recessionary D. D; a recessionary
One reason that the aggregate demand curve has a negative slope is that when the domestic price level rises,
A) firms produce more goods and services. B) firms produce fewer goods and services. C) people substitute toward more imported goods and services. D) peoples' wealth increases.
Which of the following is true according to the case study on U.S. / China trade presented in the chapter?
A) China has relative abundance in capital. B) China has relative abundance in skilled labor. C) The United States has relative scarcity in unskilled labor. D) The United States has relative scarcity in capital.
Answer the following questions true (T) or false (F)
1. A bumper corn crop will increase both producer and consumer surplus. 2. A market shortage occurs in a market when the quantity supplied at a given price exceeds the quantity demanded. 3. A market surplus occurs in a market when the quantity supplied at a given price is greater than the quantity demanded.