Y= AD on 45-degree line AD A C, + I(r) + G +X Note: AD = c, + c,(1 – t)Y + I(r) + G + X-mY 45° Output (income), Y By using the figure, you should state whether the following statements are correct or not. a. If the new equilibrium level of output B lies to the right of A, then this must be the outcome of a cut in autonomous consumption. True or False? b. If the new equilibrium level of output B lies to the right of A, then lower tax and higher government spending will be the best fiscal policy combination to bring the economy back to A. True or False? Aggregate demand, AD

Y= AD on 45-degree line AD A C, + I(r) + G +X Note: AD = c, + c,(1 – t)Y + I(r) + G + X-mY 45° Output (income), Y By using the figure, you should state whether the following statements are correct or not. a. If the new equilibrium level of output B lies to the right of A, then this must be the outcome of a cut in autonomous consumption. True or False? b. If the new equilibrium level of output B lies to the right of A, then lower tax and higher government spending will be the best fiscal policy combination to bring the economy back to A. True or False? Aggregate demand, AD

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter11: The Firm: Production And Costs

Section: Chapter Questions

Problem 21P

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