In a Simple Macro Model with a Constant Price Level,a

question 9

Multiple Choice

In a simple macro model with a constant price level,a decrease in the net tax rate causes the AE curve to

• A)shift parallel downward.
• B)shift parallel upward.
• C)rotate downward.
• D)rotate upward.
• E)remain stationary.

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Definitions:

Opportunity Costs

The forfeit of discarding the next top choice during the decision-making procedure.

Scarce Resources

Resources that are limited in availability and cannot satisfy all the various uses for them, leading to competition and the need for allocation.

Production Possibility Frontier

The Production Possibility Frontier (PPF) is a graphical representation that shows the maximum quantity of two goods or services that a society can produce, given fixed resources and technology, highlighting the trade-offs in production choices.

Labor Force

The total number of people, including both the employed and the unemployed, who are of working age and seeking employment.