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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Answer the following statements true (T) or false (F)
1. Once the monopolistic competitor is established and earning positive economic profits, no other firms will be able to profitably enter the market. 2. There are no benefits to monopolistic competition, because it does not provide either productive or allocative efficiency. 3. Oligopolies can form when smaller firms would have higher average costs and be unable to compete, while larger firms would produce such a high quantity that they would not be able to sell it at a profitable price. 4. Even when oligopolists recognize that they would benefit as a group by acting like a monopoly, if one or more give in to the temptation to produce just a slightly higher quantity and earn a slightly higher profit, the market price will fall. 5. Because of antitrust regulations, merging businesses are not allowed to hire workers or lay them off for a period of at least 18 months.
The composition of M2 as of December 2010 includes saving deposits at savings banks and credit unions
a. True b. False Indicate whether the statement is true or false
When net taxes increase and government purchases decrease, _____
Fill in the blank(s) with the appropriate word(s).
Which of the following would cause aggregate demand to decrease?
A. Businesses and households believe that the economy is headed for good times, so they begin to feel increased security about their jobs. B. A drop in the foreign exchange value of the dollar C. The Fed increases the amount of money in circulation. D. The government increases taxes on both business and personal income.