Refer to the information provided in Figure 13.3 below to answer the questions that follow.
Figure 13.3
-Refer to Figure 13.3.Assume the economy is at Point A.Higher oil prices shift the aggregate supply curve to AS₂.If the government decides to counter the effects of higher oil prices by increasing net taxes,then the price level will be ________ than P₂ and output will be ________ than Y₂.

Question

Refer to the information provided in Figure 13.3 below to answer the questions that follow.

Figure 13.3
-Refer to Figure 13.3.Assume the economy is at Point A.Higher oil prices shift the aggregate supply curve to AS₂.If the government decides to counter the effects of higher oil prices by increasing net taxes,then the price level will be ________ than P₂ and output will be ________ than Y₂.

Quizplus · Accepted Answer

Increasing net taxes reduces aggregate demand, which decreases both the price level and output, making them less than P2 and Y2, respectively.

Refer to the Information Provided in Figure 13