Question Details

How would this policy be reflected on an AS/AD diagram 


1. "One striking challenge came from "supply-side" economists who contended that the sheer waste and perverse incentives associated with high tax rates created opportunities to cut tax rates without cutting ......." Complete this sentence. 
a) inflation b) tax receipts c) employment d) budget deficits 
2. "Supply-side economics, packaged and popularized as 'Reaganomics,' has become a big deal in the current policy debate over the fight against stagflation. To counteract this phenomenon of persistent high inflation, unemployment and stagnant growth, supply-side policies emphasize increasing production to take the pressure off prices." How would this policy be reflected on an AS/AD diagram ? 
a) the AS curve shifts up b) the AD curve shifts right 
c) the AS curve shifts down d) the AD curve shifts left 
3. "With the economy mired in recession, it is almost a classic case of room for government stimulus without damage." This means that the government can increase spending with no resulting increase in 
a) income b) inflation c) tax receipts d) unemployment 
4. Since the long-run aggregate supply curve is vertical, then, in the long run, 
a) real national income and the price level are determined by aggregate demand 
b) real national income and the price level are determined by aggregate supply 
c) real national income is determined by aggregate supply and the price level by aggregate demand 
d) real national income is determined by aggregate demand and the price level by aggregate supply 
5. If the demand-side effects of a supply-side tax cut dominate the supply-side effects, then we can expect the tax cut to 
a) decrease output and the price level b) increase output and the price level 
c) decrease output and increase the price level 
d) increase output and decrease the price level




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