Coral Reef Senior High School - ECON 10106_02 AP MACRO

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06_02 A. Draw a correctly labeled aggregate demand and aggregate supply graph and show each of the following: I. The long-run aggregate supply curve II. Current price level and output levels, labe... led PLe and Ye III. Full employment output, labeled Yf B. Identify one fiscal policy action that could resolve the problem. One fiscal policy action that could resolve the problem would be for the federal government to increase personal taxes. C. Using your graph in Part A, show the short-run effects of the action you identified on each of the following: I. Aggregate demand. Explain (use the cause and effect chain you learned in the lesson) Due to higher personal taxes, consumers will see a decrease in disposable income therefore creating a decrease in consumer spending. This will cause a decrease in aggregate demand and a shift to the left of the AD curve. II. Output Output will decrease. III. Price level Price level will also decrease [Show More]

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