Refer to the information provided in Figure 27.2 below to answer the question(s) that follow. Figure 27.2
-Refer to Figure 27.2. Firms respond to a decrease in net taxes by mostly raising their prices when the aggregate demand curve shifts from

Question

Refer to the information provided in Figure 27.2 below to answer the question(s) that follow.

Figure 27.2
-Refer to Figure 27.2. Firms respond to a decrease in net taxes by mostly raising their prices when the aggregate demand curve shifts from

Quizplus · Accepted Answer

In Figure 27.2, a decrease in net taxes is represented by a shift of the aggregate demand curve from AD₅ to AD₆. As a result, firms respond by raising their prices, shifting the short-run aggregate supply curve to the left from SRAS1 to SRAS2. This is consistent with choice C, where the aggregate demand curve shifts from AD₅ to AD₆.

Refer to the Information Provided in Figure 27