Question

18. If an economy is at full employment, an income tax cut will result in:

A. a higher price level and more output in the short run, but only higher output in the long run.
B. a higher price level and more output in the short run, but only a higher price level in the long run.
C. an increase in LRAS and economic growth.
D. a decrease in AD and an increase in capacity.
E. an increase in AD and increased output in the long run.

Answer 1

Answer: b