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AP® Macroeconomics

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Moderate

Increased Taxes and Macroeconomic Equilibrium

APMACR-S4EAGO

If the federal government of Country X decided to increase taxes, what effect would it have on macroeconomic equilibrium in the short run?

A

Short-run aggregate supply would shift to the left, causing the equilibrium price level to rise and output to fall.

B

Aggregate demand would shift to the left, causing the equilibrium price level to fall and output to fall.

C

Aggregate demand would shift to the left, causing the equilibrium price level to rise and output to fall.

D

Aggregate demand would shift to the right, causing the equilibrium price level to rise and output to rise​.

E

Short-run aggregate supply would shift to the right, causing the equilibrium price level to rise and output to fall.