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

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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Question

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
Economic growth will decrease.
Inflation will increase.
GDPⓇ
GDP₁
Real GDP (trillions of 2009 dollars)
Unemployment will decrease.
SRASI
AD₁

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