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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A central bank is
A) an international bank. B) the largest bank in the country. C) a banker's bank. D) the largest bank in the country's capital.
When producing at a production efficient point, ________
A) our choice of the goods can be either on or within the production possibilities frontier B) we can satisfy our all wants C) the opportunity cost of another good is zero D) we face a tradeoff and incur an opportunity cost
In a price system, changes in prices
A) make it difficult for the system to function well. B) imply that people have made mistakes in the past. C) signal to everyone in the system what goods are relatively more or less scarce. D) signal to policy makers what goods should and should not be taxed more.
The reduction in aggregate demand caused by deflation:
A. further reduces prices, causing a deflationary spiral. B. further reduces prices, causing aggregate supply to shift left back to long-run equilibrium. C. will decrease production and increase prices, causing inflation to adjust the price level. D. will decrease production and increase prices, causing a deflationary trap.