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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.
Producer Surplus
The difference between the amount producers are willing to accept for a good or service versus what they actually receive.
Subsidies
Financial support provided by governments to individuals, businesses, or institutions to promote certain activities deemed beneficial.
Higher-Valued Uses
The allocation of resources or goods to their most profitable or beneficial applications, typically where they contribute the most to welfare or profitability.
Lower-Valued Uses
Activities or allocations of resources that do not maximize potential value or returns compared to other uses.
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