1. Refer to Figure 1. An increase in taxes would be depicted as a movement from
ID: 1115229 • Letter: 1
Question
1. Refer to Figure 1. An increase in taxes would be depicted as a movement from ________, using the AD-AS model in the figure above.
A. E to B
B. B to C
C. A to B
D. B to A
E.C to D
2. Refer to Figure 1. Suppose the economy is in a recession and expansionary fiscal policy is pursued. Using the AD-AS model in the figure above, this would be depicted as a movement from
A. A to B.
B. B to C.
C. C to B.
D. B to A.
E. A to E.
3. Refer to Figure 1. Suppose the economy is in short-run equilibrium below potential GDP and Congress and the president lower taxes to move the economy back to long-run equilibrium. Using the AD-AS model in the figure above, this would be depicted as a movement from
A. A to B.
B. B to C.
C. C to B.
D. B to A.
E. A to E.
4. Refer to Figure 1. Suppose the economy is in short-run equilibrium below potential GDP and no fiscal or monetary policy is pursued. Using the AD-AS model in the figure above, this would be depicted in the long-run as a movement from
A. A to B.
B. B to C.
C. C to B.
D. B to A.
E. A to E.
5. Refer to Figure 1. Suppose the economy is in short-run equilibrium above potential GDP and no policy is pursued. Using the AD-AS model in the figure above, this would be depicted in the long-run as a movement from
A. D to C
B. A to E.
C. C to D.
D. C to B.
E. E to A.
6. Refer to 1. Suppose the economy is in short-run equilibrium above potential GDP and wages and prices are rising. If contractionary policy is used to move the economy back to long run equilibrium, this would be depicted as a movement from ________ using the AD-AS model in the figure above.
A. D to C
B. C to B
C. A to E
D. B to A
E. E to A
Figure 1 Price level LRAS SRAS AD AD Real GDPExplanation / Answer
Ans:
1) Option D
B to A
Increases in taxes decreases the consumer spending and the aggregate demand curve will shift to the left.
2) Option A
A to B
The expansionary monetary policy will increase the consumer demand and shift the Aggregate demand curve from A to B
3) Option A
A to B
The decrease in taxes will increase the consumer disposable income and the shift the Aggregate demand curve from A to B
4) Option E
A to E
when no policy is persued the aggregate supply curve will move from A to E
5) Option C
C to D
6) option B
C to B
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