Figure 35-2
Use the pair of diagrams below to answer the following questions.
-Refer to Figure 35-2.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 35-2
Use the pair of diagrams below to answer the following questions. 
-Refer to Figure 35-2.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 would shift the AD curve to the left. In the short run, this would lead to a decrease in output and an increase in prices, moving the economy to point D and 3.

Figure 35-2 Use the Pair of Diagrams Below to Answer the Following