Figure 22-2
Use the pair of diagrams below to answer the following questions.
-Refer to Figure 22-2. If the economy starts at C and 1, then in the short run, an increase in taxes moves the economy to
A)B and 2.
B)D and 3.
C)E and 2.
D)None of the above is correct.

Question

Figure 22-2
Use the pair of diagrams below to answer the following questions. 
-Refer to Figure 22-2. If the economy starts at C and 1, then in the short run, an increase in taxes moves the economy to
A)B and 2. 
B)D and 3. 
C)E and 2. 
D)None of the above is correct.

Quizplus · Accepted Answer

An increase in taxes decreases overall output, shifting the SRAS curve leftward. This results in a short-run equilibrium at point D and 3, with a lower level of output and a higher price level.

Figure 22-2 Use the Pair of Diagrams Below to Answer the Following