The graph shown displays various economic outcomes. At which equilibrium would the government most likely decide to decrease taxes?
A) Point A
B) Point B
C) Point C
D) Point D

Question

The graph shown displays various economic outcomes.  At which equilibrium would the government most likely decide to decrease taxes?
A) Point A 
B) Point B 
C) Point C 
D) Point D

Quizplus · Accepted Answer

At Point B, the economy is experiencing low output and high unemployment. This indicates that there is a recession in the economy. The government would most likely decrease taxes to stimulate aggregate demand and boost economic growth.

The Graph Shown Displays Various Economic Outcomes