-In the above figure,if the economy is initially at point D and taxes are cut,if potential GDP does not change then the economy will move to point
A) move to point C.
B) move to point A.
C) move to point B.
D) stay at point D.

Question

-In the above figure,if the economy is initially at point D and taxes are cut,if potential GDP does not change then the economy will move to point
A) move to point C. 
B) move to point A. 
C) move to point B. 
D) stay at point D.

Quizplus · Accepted Answer

If taxes are cut, aggregate demand will increase, shifting the AD curve to the right. If potential GDP does not change, the economy will move to the new equilibrium at point A, where AD = AS.

-In the Above Figure,if the Economy Is Initially at Point