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...
Under President Eisenhower the problem of inflation.
A. got a lot worse. B. got a little worse. C. got a little better. D. got a lot better.
If a firm has an incentive to increase supply now and decrease supply in the future, then the firm expects that the
A) demand for the product will be lower in the future than it is today. B) price of its product will be higher in the future than it is today. C) price of its product will be lower in the future than it is today. D) price of inputs will be lower in the future than they are today.
The MRP of labor will shift to the right if
A) labor productivity increases. B) labor productivity decreases. C) wages increase. D) wages decrease.
Classical economists believe that:
A. velocity is not constant. B. changes in the money supply affect real GDP. C. the quantity of money explains prices. D. the money supply affects velocity.