Figure 18-1

-Refer to Figure 18-1.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 basic AD-AS model in the figure above,this would be depicted as a movement from

Question

Figure 18-1
 
-Refer to Figure 18-1.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 basic AD-AS model in the figure above,this would be depicted as a movement from

Quizplus · Accepted Answer

A movement from short-run equilibrium (point A) to long-run equilibrium (point B) can be achieved by increasing aggregate demand. Lowering taxes increases disposable income and consumption, leading to an increase in aggregate demand. This shift is depicted as a movement from point A to point B along the short-run aggregate supply curve.

Figure 18-1 -Refer to Figure 18-1.Suppose the Economy Is in Short-Run Equilibrium