Use the Figure Below to Answer the Following Question

question 76

Multiple Choice

Use the figure below to answer the following question.
Figure 15-5

-Refer to Figure 15-5.If the economy were currently operating at point A in the exhibit and expansionary policy were enacted that would shift AD₁ to AD₂,

• A)if people have adaptive expectations,the economy would move to point B in the short run.
• B)if people have rational expectations,the economy would move to point C in the short run.
• C)in the long run,the economy would move to point C regardless of how expectations are formed.
• D)all of the above are true.

Understand the concept of excess burden and how it affects economic decisions.

Analyze how taxes influence the supply and demand of goods and services.

Comprehend the principle of tax neutrality and its implications on economic efficiency.

Calculate the total burden of a tax, including both the tax revenue and the excess burden.

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Definitions:

Legitimate Power

A form of authority derived from a position of power within an organization, granting the ability to make decisions, command resources, and enforce obedience.

Shifts Focus

Shifts focus refers to changing the direction of attention, resources, or efforts from one area, subject, or task to another, often to adapt to new priorities or challenges.

Referent Power

A form of influence that derives from the leader's ability to gain respect and admiration from followers, leading them to identify with or emulate the leader.

Empowerment

Granting individuals or groups the authority and confidence to make decisions and take actions autonomously.