Figure 17-1
-Refer to Figure 17-1. If the economy starts at c and 1, then in the short run, an increase in taxes moves the economy to where?

Question

Figure 17-1 
-Refer to Figure 17-1. If the economy starts at c and 1, then in the short run, an increase in taxes moves the economy to where?

Quizplus · Accepted Answer

An increase in taxes decreases disposable income, leading to a decrease in consumption and aggregate demand. This results in a movement up along the short-run aggregate supply curve to a point with lower output and higher prices, which corresponds to option B (d and 3).

Figure 17-1 -Refer to Figure 17-1. If the Economy Starts at C