Figure 27-1
-Refer to Figure 27-1.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 static 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.

Question

Figure 27-1 
-Refer to Figure 27-1.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 static 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.

Quizplus · Accepted Answer

Lowering taxes increases aggregate demand, shifting the AD curve rightward from A to B, moving the economy towards long-run equilibrium.

Figure 27-1 -Refer to Figure 27-1.Suppose the Economy Is in Short-Run Equilibrium