Figure 12-4
-Refer to Figure 12-4. If the economy's long-run aggregate supply curve is LRAS₁, and if the Jeconomy is in equilibrium at Y₁, supply-side economists would advocate

Question

Figure 12-4 -Refer to Figure 12-4. If the economy's long-run aggregate supply curve is LRAS₁, and if the Jeconomy is in equilibrium at Y₁, supply-side economists would advocate

Quizplus · Accepted Answer

Supply-side economists believe that tax cuts can stimulate LRAS and SRAS, leading to an increase in potential output and a shift of both supply curves to the right, as shown by the shift from LRAS₁ and SRAS₁ to LRAS₂ and SRAS₂. This can lead to sustained economic growth and higher employment levels. Tax increases or decreased aggregate demand are not likely to have the same effect on long-run aggregate supply.

Figure 12-4 -Refer to Figure 12-4. If the Economy's Long-Run Aggregate Supply