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...
Auto workers negotiate a wage increase. How does this wage hike affect the supply of cars?
A) It decreases the supply. B) It increase the supply. C) It has no effect. D) There is not enough information to tell if the change increases, decreases, or has no effect on the supply of cars.
During the Revolutionary War, the U.S. trade deficit increased because:
a. U.S. imports decreased, while U.S. exports increased. b. U.S. imports increased, while U.S. exports decreased. c. U.S. exports decreased more than U.S. imports decreased. d. U.S. imports decreased more than U.S. exports decreased.
In a market characterized by many sellers, assume that transaction costs for both buyers and sellers are both costlessly cut to zero. What will happen to total economic value?
a. Economic value will remain unchanged because the decrease in consumer surplus will offset the increase in producer surplus. b. Economic value will remain unchanged because the decrease in producer surplus will offset the increase in consumer surplus. c. Economic value will certainly increase but its magnitude will depend on the initial transaction costs of the market participants. d. Economic value will certainly decrease but its magnitude will depend on the initial transaction costs of the market participants.
The natural rate of unemployment worsens if:
a. A nation's resource endowments expand. b. Labor force mobility worsens. c. Capital markets become more competitive. d. None of the above. e. Actually, the natural rate cannot worsen. That's why it's called "natural."