Figure 16-1
-Refer to Figure 16-1.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

Question

Figure 16-1 
-Refer to Figure 16-1.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

Quizplus · Accepted Answer

The correct answer is A because lowering taxes would increase aggregate demand, shifting the AD curve to the right and moving the economy from point A to point B.

Figure 16-1 -Refer to Figure 16-1.Suppose the Economy Is in Short-Run Equilibrium