Refer to the information provided in Figure 13.2 below to answer the questions that follow. Figure 13.2
-Refer to Figure 13.2.Firms respond to a decrease in net taxes by mostly increasing output when the aggregate demand curve shifts from
A)AD1 to AD2.
B)AD3 to AD4.
C)AD5 to AD6.
D)AD6 to AD1.

Question

Refer to the information provided in Figure 13.2 below to answer the questions that follow.  Figure 13.2
-Refer to Figure 13.2.Firms respond to a decrease in net taxes by mostly increasing output when the aggregate demand curve shifts from
A)AD1 to AD2. 
B)AD3 to AD4. 
C)AD5 to AD6. 
D)AD6 to AD1.

Quizplus · Accepted Answer

A decrease in net taxes will shift the aggregate demand curve to the right (from AD1 to AD2), causing an increase in output. This is because consumers have more disposable income to spend, which leads to an increase in consumption and investment.

Refer to the Information Provided in Figure 13