Refer to the information provided in Figure 12.2 below to answer the questions that follow. Figure 12.2
-Refer to Figure 12.2. Firms respond to a decrease in net taxes by mostly raising their prices when the aggregate demand curve shifts from

Question

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

Figure 12.2
-Refer to Figure 12.2. Firms respond to a decrease in net taxes by mostly raising their prices when the aggregate demand curve shifts from

Quizplus · Accepted Answer

According to Figure 12.2, when the aggregate demand curve shifts from AD₅ to AD₆, there is a decrease in net taxes, leading to an increase in disposable income. Firms respond to this increase in demand by raising their prices by a significant amount, as shown by the movement from point B15 to B16 on the supply curve. Therefore, the correct answer is C.

Refer to the Information Provided in Figure 12