Refer to Figure 18.6 for the Following Questions

question 116

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.If the tax change is not effective and labour supply and savings do not increase because of the tax change,then the tax change will __________.

• A) decrease the price level below P₂
• B) increase output above Y₂
• C) not change the price level
• D) shift LRAS₂ to the right

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Definitions:

Permeability

The ability of a material, especially soil or rock, to allow fluids to pass through it via an interconnected network of pores.

Porosity

A measure of how much of a rock is open space, which can hold fluids such as water, oil, or gas.

Uncompacted Clay

Clay in its natural, undisturbed state, not subjected to pressure, and therefore retaining its original volume and porosity.

Permeability

The capacity of a rock or soil to transmit water or other fluids through its pore spaces and fractures.