Starting from Short-Run Equilibrium,the Following Occurs: Personal Income Taxes Rise

question 96

Multiple Choice

Starting from short-run equilibrium,the following occurs: personal income taxes rise and foreign real national income rises.What is the effect on the price level and Real GDP in the short run?

• A) The price level rises and Real GDP falls.
• B) The price level falls and Real GDP falls.
• C) The price level rises and Real GDP rises.
• D) The price level falls and Real GDP rises.
• E) There is not enough information to answer this question.

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Definitions:

Variable Cost

Variable costs are expenses that vary directly with the level of production or sales volume, such as materials and labor costs.

High-Low Data

A method used in various analyses that involves observing the highest and lowest data points to assess trends or calculate variables.

Units Produced

The total quantity of units manufactured by a company during a specific period.

Relevant Range

The relevant range refers to the span of activity or volume within which the assumptions about cost behavior hold true.