-Refer to Figure 15-7

question 47

Multiple Choice

-Refer to Figure 15-7.If the economy is currently at a price level of 120 and real GDP is $6.5 trillion,an increase in taxes will,in the short run,

• A) shift the aggregate demand curve rightward,increasing both the price level and real GDP
• B) shift the aggregate demand curve leftward,decreasing both the price level and real GDP
• C) shift the aggregate supply curve upward,increasing the price level and decreasing real GDP
• D) shift the aggregate supply curve downward,decreasing the price level and increasing real GDP
• E) have no effect on aggregate demand because of crowding out

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Definitions:

Marginal Tax Rate

The rate at which an additional dollar of income is taxed, representing the percentage of tax applied to the last dollar earned.

Tax-Free

Tax-free describes goods, transactions, or income that are not subject to taxation by the government.

Taxed

Subjected to a financial charge or levy by a government on income, goods, or activities.

Progressive Tax

A tax system in which the tax rate increases as the taxable amount increases, resulting in those who have higher incomes being taxed at a higher rate.