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
You might also like to view...
Which of the following is NOT a factor of production?
A) mineral resources B) a university professor C) an apartment building D) 100 shares of Microsoft stock
Collateral requirements lessen the consequences of ________ because the collateral reduces the lender's losses in the case of a loan default and it reduces ________ because the borrower has more to lose from a default
A) adverse selection; moral hazard B) moral hazard; adverse selection C) adverse selection; diversification D) diversification; moral hazard
Probably the simplest approach to the problem of oligopolistic interdependence is to
A. conduct market experiments. B. assume that rivals will pursue a course most detrimental to the firm concerned. C. ignore the actions of rivals. D. increase the firm’s advertising outlay considerably.
A production or consumption quota that can be bought or sold is called:
A. a subsidy. B. a tax. C. a tradable allowance. D. a buyers' or sellers' quota.