Use the Following to Answer Questions

question 39

Multiple Choice

Use the following to answer questions:
-(Figure: Fiscal Policy I) Refer to Figure: Fiscal Policy I. Suppose that this economy is in equilibrium at E₂. If there is an increase in taxes_____ will shift to the _____, causing a(n) _____ in the price level and a(n) _____ in real GDP.

• A) AD_2; left; increase; decrease
• B) AD_2; left; decrease; decrease
• C) AD_1; right; increase; increase
• D) AD_1; right; decrease; increase

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Definitions:

Indirect Costs

Expenses that are not directly traceable to a specific product, project, or activity, often including utilities, rent, and administrative salaries.

Responsibility Centres

Sections or divisions of a business for which a manager has authority and responsibility, typically including revenue, expense, profit, and investment centers.

Seasonal

Relating to or dependent on a particular season or time of year, often affecting businesses, climate, or activities in a cyclical manner.

Cyclical

Characterized by or subject to cycles, often used to describe economic activities that fluctuate with the overall state of the economy.