Refer to the Accompanying Figure

question 94

Multiple Choice

Refer to the accompanying figure. Starting from long-run equilibrium at point C, a tax cut that increases aggregate demand from AD to AD¹ will lead to a short-run equilibrium at point ________ and eventually to a long-run equilibrium at point ________, if left to self-correcting tendencies.

• A)D; B
• B)D; C
• C)B; A
• D)B; C

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Definitions:

Profitability Expense

A cost incurred by a business that is considered when calculating its profitability, often relating to the operational, production, or administrative aspects of the company.

Rivalry Among Firms

The competition between businesses in the same industry to gain increased revenue, market share, and customer loyalty.

Located Close

The condition or state of being situated near a specific point of interest or within a short distance of a particular location.

Single Firm

A business or company that operates independently without affiliations to parent or subsidiary entities.