Starting from Long-Run Equilibrium, an Increase in Aggregate Demand Increases

question 51

Multiple Choice

Starting from long-run equilibrium, an increase in aggregate demand increases ______ in the short run, but only increases ______ in the long run.

• A) output; prices
• B) prices; output
• C) short-run aggregate supply; long-run aggregate supply
• D) the money supply; the natural rate of output

---

Definitions:

Benefits-Received Tax

A taxation principle where taxes are levied on individuals based on the benefits they receive from the government's use of the collected tax.

Vertical Equity

A principle in taxation that proposes taxpayers with a greater ability to pay, such as higher income levels, should pay more in taxes than those with lesser ability to pay.

Horizontal Equity

The principle that individuals with the same income or resources should be treated equally by the tax system.

Tax Deductions

Expenses that can be subtracted from gross income to reduce the amount of income that is subject to income tax.