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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Describe the broad facts about what, how, and for whom goods and services are produced
What will be an ideal response?
Any activity designed to transfer income or wealth to a particular individual or firm at society's expense is called:
A. X-inefficiency. B. rent-seeking. C. price discrimination. D. patent protection.
The values on the axes of the long-run aggregate supply diagram are
A) real GDP and interest rates. B) real GDP per year and the price level. C) nominal GDP and the price level. D) real GDP and nominal GDP.
According to ________, the economy is normally at potential GDP
A) real business cycle models B) the adaptive expectations theory C) the short-run Phillips curve D) new Keynesian economists