Figure 12.3 Alt text for Figure 12.3: In figure 12.3, a graph comparing real GDP and price level.
Long description for Figure 12.3: The x-axis is labelled, real GDP (trillions of 2007 dollars)and the y-axis is labelled, price level (CPI).4 lines are shown; AD1, AD2, LRAS, and SRAS.Line AD1 begins at the top left corner and slopes down to the end of the x-axis.Line AD2 follows the same slope as line AD1, but is plotted to the right.Line SRAS begins close to the vertex and slopes up to the top right corner.Line LRAS is perpendicular to the x-axis and passes through point B.Lines AD1 and SRAS intersect at point A.Lines AD2, LRAS, and SRAS intersect at point B.
-Refer to Figure 12.3.In the graph above, suppose the economy is initially at point A.The movement of the economy to point B as shown in the graph illustrates the effect of which of the following policy actions by the federal government?

Question

Figure 12.3  Alt text for Figure 12.3: In figure 12.3, a graph comparing real GDP and price level.
Long description for Figure 12.3: The x-axis is labelled, real GDP (trillions of 2007 dollars)and the y-axis is labelled, price level (CPI).4 lines are shown; AD1, AD2, LRAS, and SRAS.Line AD1 begins at the top left corner and slopes down to the end of the x-axis.Line AD2 follows the same slope as line AD1, but is plotted to the right.Line SRAS begins close to the vertex and slopes up to the top right corner.Line LRAS is perpendicular to the x-axis and passes through point B.Lines AD1 and SRAS intersect at point A.Lines AD2, LRAS, and SRAS intersect at point B.
-Refer to Figure 12.3.In the graph above, suppose the economy is initially at point A.The movement of the economy to point B as shown in the graph illustrates the effect of which of the following policy actions by the federal government?

Quizplus · Accepted Answer

A decrease in income taxes increases disposable income, leading to higher consumer spending, which shifts the aggregate demand curve to the right, moving the economy from point A to point B.

Figure 123 Alt Text for Figure 12