Refer to Figure 18.6 for the Following Questions

question 12

Multiple Choice

Refer to Figure 18.6 for the following questions.
Figure 18.6
-Suppose the federal government reduces income taxes.Assume that the movement from A to B in Figure 18.6 represents normal growth in the economy before the tax change.Also assume that aggregate demand does not change.If the tax change is effective and labour supply and savings increase because of the tax change,then the tax change will __________.

• A) shift LRAS₂ to the right
• B) decrease output to less than Y₂
• C) not change the price level
• D) decrease the price level to less than P₁, but more than P₂

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Definitions:

Qualified

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Statue Of Frauds

A legal doctrine requiring certain agreements to be in writing and signed to be legally binding, aiming to prevent fraud.

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Mercedes

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