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...
The distribution of income primarily determines which of the fundamental economic questions?
A) How the goods and services are to be produced? B) Who will receive the goods and services produced? C) What goods and services are to be produced? D) How to plan the economy?
Is a coordination failure a type of market failure? Explain
What will be an ideal response?
Suppose you are risk averse and you are deciding between two investments. One has a guaranteed return of 5% while the second has a 50% chance of a 10% return and a 50% chance of a 0% return. Which investment would you choose? Why?
What will be an ideal response?
What determines whether the industry long-run supply curve is upward sloping or horizontal?
What will be an ideal response?