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
You might also like to view...
What is the price elasticity of demand? In terms of percentage changes, what is its formula?
What will be an ideal response?
What crucial role do financial intermediaries perform in an economy?
What will be an ideal response?
In an Edgeworth box, all points of efficiency occur at the
A) intersections of the indifference curves. B) the points of tangency between the sets of indifference curves. C) in the midpoint of the diagram. D) at any point other than the intersections of the indifference curves.
An economic model is a purposeful simplification of reality, whose function includes:
A. Understanding the full complexity of the real world B. Predicting the behavior of each and every individual or organization C. Analyzing the behavior of a typical or average consumer or firm D. Forecasting economic random events with a high level of accuracy