Refer to the Graph $\mathrm { AD } _ { 2 }$

question 258

Multiple Choice

Refer to the graph. If the economy is initially at equilibrium at the intersection of AD1 and AS1 and there is a tax cut, then, from a skeptical mainstream perspective, the immediate impact is that
Aggregate

• A) demand would increase to AD \(\mathrm { AD } _ { 2 }\) and aggregate supply would increase to A \(\mathrm { AS } _ { 2 }\)
• B) demand would increase to AD \(\mathrm { AD } _ { 2 }\) and aggregate supply would remain at A \(\mathrm { AS } _ { 1 } .\)
• C) supply would increase to A \(\mathrm { AS } _ { 2 }\) and aggregate demand would remain at AD \(A D _ { 1 }\)
• D) demand would remain at AD \(A D _ { 1 }\) and aggregate supply would remain at A \(\mathrm { AS } _ { 1 }\)