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8 December, 19:15

At p1y1, if taxes decrease then consumer spending will decrease and ad will shift right to long-run equilibrium. decrease and ad will shift left to long-run equilibrium. increase and ad will shift right to long-run equilibrium. increase and ad will shift left to long-run equilibrium. cannot be determine with information given.

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  1. 8 December, 19:49
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    Answer: Increase and ad will shift right to long-run equilibrium.

    Explanation: A decrease in Taxes lead to an increase in the disposable income of the consumers. This results in higher consumer spending at the given income levels. As a result the AD curve shifts to the right towards the long run equilibrium level.
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