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.
A)greater;greater
B)greater;less
C)less;less
D)less;greater

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.
A)greater;greater 
B)greater;less 
C)less;less 
D)less;greater

Quizplus · Accepted Answer

Increasing net taxes reduces aggregate demand, leading to a lower price level and lower output compared to P2 and Y2.

Refer to the Information Provided in Figure 13