Refer to the information provided in Figure 13.2 below to answer the questions that follow. Figure 13.2
-Refer to Figure 13.2.The tax multiplier is smallest (in absolute value)when the aggregate demand curve shifts from
A)AD1 to AD2.
B)AD3 to AD4.
C)AD5 to AD6.
D)The output multiplier is the same for all AD curve shifts shown in the figure.

Question

Refer to the information provided in Figure 13.2 below to answer the questions that follow.  Figure 13.2
-Refer to Figure 13.2.The tax multiplier is smallest (in absolute value)when the aggregate demand curve shifts from
A)AD1 to AD2. 
B)AD3 to AD4. 
C)AD5 to AD6. 
D)The output multiplier is the same for all AD curve shifts shown in the figure.

Quizplus · Accepted Answer

The tax multiplier is smallest in absolute value when the economy is closer to full capacity, which is typically represented by a smaller shift in the aggregate demand curve, such as from AD5 to AD6.

Refer to the Information Provided in Figure 13