Use the following to answer questions:
Figure: Fiscal Policy II 
-(Figure: Fiscal Policy II) Look at the figure Fiscal Policy II. Suppose that this economy is in equilibrium at E1. If there is an increase in taxes, _____ will shift to the _____, causing a(n) _____ in the price level and a(n) _____ in real GDP.
Definitions:
Product Costs
The total costs incurred to bring a product to market, including materials, labor, and overhead.
Product Quality
The characteristics of a product that determine its ability to satisfy stated or implied needs; a key factor in competitiveness.
Contingency Theory
A theory suggesting that the best way to manage an organization depends on the specific circumstances, highlighting the need to adapt to environmental and internal conditions.
External Environment
The conditions, entities, events, and factors surrounding an organization that influence its activities and choices.
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