Question

Suppose the economy is initially in​ long-run equilibrium. the government enacts a policy to decrease taxes. in the​ short-run, this expansionary fiscal policy will​ cause:
a. a shift from ad 2 to ad 1 and a movement to point​ c, with a lower price level and the same output.
b. a shift from sras 2 to sras 1 and a movement to point​ d, with a higher price level and lower output.
c. a shift from sras 1 to sras 2 and a movement to point​ b, with a lower price level and higher output.
d. a shift from ad 1 to ad 2 and a movement to point​ b, with a higher price level and higher output.

Answer 1

I think the answer is: a shift from ADI to AD2 and a movement to point B with a higher price level and higher output.

D

Answer 2

D. a shift from ad 1 to ad 2 and a movement to point b, with a higher price level and higher output.

Further Explanation

Expansive fiscal policy (expansionary fiscal policy) is a fiscal policy that is applied to a country by increasing the amount of state expenditure or government expenditure (G) and reducing the tax rate (T) to increase output or income (Y). Expansive fiscal policy also plays a role in breaking down or increasing people's purchasing power. In contrast to contractive fiscal policies that are suitable to be applied when a country's economy experiences inflation, expansionary fiscal policies are more suitable to be applied when a country's economy experiences a recession or depression.

The following are a few examples of implementing expansive fiscal policies in a country:

• There is a reduction in the income tax rate, which consists of individual tax types. This is done to provide opportunities for the public to be able to hold more money and increase purchasing power which affects the economy of a country.
• Tax deductions for certain business sectors or deductions for corporate income tax. If there is a cut in tax rates in the business sector, then there are benefits that can be used to roll back money in business activities. It can be transferred to various investment instruments, or business development that will have an impact on the needs of human resources, in this case, it will create jobs to tackle the problem of unemployment.

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Details

Grade: High School

Subject: Business

Keyword: expansive, fiscal, tax