24. assume the economy is operating at its potential level of output when congress votes to decrease…

24. assume the economy is operating at its potential level of output when congress votes to decrease business taxes. which graph below correctly shows this occurrence? graph \a\ graph \b\ graph \c\ graph \d\ a. graph a b. graph b c. graph c

24. assume the economy is operating at its potential level of output when congress votes to decrease business taxes. which graph below correctly shows this occurrence? graph \a\ graph \b\ graph \c\ graph \d\ a. graph a b. graph b c. graph c

Answer

Brief Explanations:

When business taxes decrease, businesses have more incentive to produce as their costs are reduced. This leads to an increase in the short - run aggregate supply (SRAS). In the AD - AS model, the short - run aggregate supply curve shifts to the right. In the given graphs, Graph B shows the short - run aggregate supply curve (AS) shifting to the right (from AS to AS₂), while the long - run aggregate supply (LRAS) remains unchanged as the economy was initially at potential output and the tax cut is a short - run supply factor change.

Answer:

b. Graph B