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MACROECONOMICS FOR TODAY

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter11: Fiscal Policy

Section: Chapter Questions

Problem 2SQP

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Question

Consider the economy represented by the aggregate supply-aggregate demand
graph below, which is initially at a short-run equilibrium at point A. Suppose taxes
increase. How would this affect the economy?
Price level.
(GDP deflator,
2009 = 100)
p1
LRAS1
GDP*
A
GDP1
SRAS1
Real GDP (trillions of 2009 dollars)
Economic growth will decrease.
Inflation will increase.
Unemployment will decrease.
Employment will increase.
AD1

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