Consider the economy represented by the aggregate supply-aggregate demand graph below, which is initially at a short-run equilibrium at point A. Suppose taxes increase. How would this affect the economy? Price level (GDP deflator, 2009 = 100) PI Employment will increase. LRAS₁ Inflation will increase. Economic growth will decrease. Unemployment will decrease. SRASI GDP GDP₁ Real GDP (trillions of 2009 dollars) AD₁

Consider the economy represented by the aggregate supply-aggregate demand graph below, which is initially at a short-run equilibrium at point A. Suppose taxes increase. How would this affect the economy? Price level (GDP deflator, 2009 = 100) PI Employment will increase. LRAS₁ Inflation will increase. Economic growth will decrease. Unemployment will decrease. SRASI GDP GDP₁ Real GDP (trillions of 2009 dollars) AD₁

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter22: Aggregate Demand And Aggregate Supply

Section: Chapter Questions

Problem 1P

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