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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If the world price for good A is above the domestic price for good A without trade, then consumer surplus will ________ and total economic surplus will ________ with trade.
A. increase; decrease B. decrease; increase C. decrease; decrease D. increase; increase
The process of an economy adjusting from a recession back to potential GDP in the long run without any government intervention is known as
A) fiscal policy. B) monetary policy. C) an automatic mechanism. D) "releasing sticky prices."
The proper level of government intervention is unclear when dealing with a monopoly
a. True b. False Indicate whether the statement is true or false
Which one of the following is NOT a characteristic of public goods?
A) They are indivisible. B) It is difficult to charge people on the basis of how much they use. C) Public goods can be used by increasing numbers of people at no additional cost. D) Public goods are subject to the principle of rival consumption.