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
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Controlling the quantity of money and interest rates to influence aggregate economic activity is called
A) foreign policy. B) monetary policy. C) fiscal policy. D) bank antitrust policy.
Suppose the production function for T-shirts can be represented as q = L0.25K0.75. Show that the marginal productivity of labor diminishes in the short run
What will be an ideal response?
Is it possible for a country's nominal GDP to increase and real GDP to decrease from one year to the next?
A. Yes, it would indicate a larger rise in prices relative to a decrease in output. B. No, since prices are held constant and that would be mathematically impossible. C. Yes, it would indicate a larger rise in output relative to a decrease in prices. D. No, since output is held constant and that would be mathematically impossible.
If an action creates more total benefits for gainers than total harm to losers,
a. that action would be a Pareto improvement. b. taking that action would improve efficiency c. the government should step in to take that action d. a side payment exists that would make the action a Pareto improvement e. any side payment would make the action inefficient