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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The labor supply curve bends backward because
A. income effects are greater than substitution effects at higher wages. B. substitution effects are greater than income effects at higher wages. C. income effects are greater than substitution effects at lower wages. D. substitution effects are greater than income effects at lower wages.
Under NAFTA, environmental standards are
A) harmonized around Mexican rules. B) harmonized around U.S. rules. C) harmonized around Canadian rules. D) harmonized around a combination of the rules in all three countries. E) not harmonized.
The marginal tax rate has less effect on economic incentives than does the average tax rate
a. True b. False Indicate whether the statement is true or false
When the government levies a $100 million tax on people's income and puts the $100 million back into the economy in the form of a spending program, such as new interstate highway construction, the:
a. level of real GDP expands by $100 million. b. tax, then, generates a $100 million decline in real GDP. c. tax multiplier overpowers the income multiplier, triggering a rollback in real GDP. d. effect on real GDP is uncertain.