Refer to the information provided in Figure 12.2 below to answer the questions that follow. Figure 12.2 -Refer to Figure 12.2. 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

Quizplus · Accepted Answer

The tax multiplier is smallest in absolute value when the shift in aggregate demand results in the smallest change in output, which typically occurs when the economy is closer to full capacity, as represented by the shift from AD5 to AD6.

Refer to the Information Provided in Figure 12