It is argued that a policy of tax simplification will result in: A. A shift from LRAS 2 to LRAS 1 with a higher price level and lower output. B. A shift from LRAS 1 to LRAS 2 with higher output at a lower price level. C. A shift from LRAS 1 to LRAS 2 with lower output at a lower price level. D. A shift from LRAS 2 to LRAS 1 with a lower price level and higher output.

B. A shift from LRAS 1 to LRAS 2 with higher output at a lower price level

Explanation:

When there is a tax simplification in the economy, there would be an increase in the labour supply, saving and investment in the economy, contributing to the enhancement of the economic efficiency. So that it would also make the quantity of real GDP supplied increased, shifting the LRAS1 to the right to LRAS2 with higher output (higher GDP) and the aggregate demand remains unchanged.

Initially, the market is at the equilibrium at point A: Price = P1; Output = Q1

According to the graph attached, when the AD curve stands still, the LRAS shifts to the right, the market moves to the new equilibrium at point B: Output = Q2 > Q1; Price = P2 < P1

So that, the tax simplification results in a shift from LRAS 1 to LRAS 2 with higher output at a lower price level. (Answer B)

hi,

henry is an economist and wants to understand the relationship between inflation and consumer spending habits. for his research, he needs the consumer price index for 2014 and the inflation rate. based on the prices of goods given, what will he find to be the cpi and inflation rate for 2014? assume that a consumer’s basket for three consecutive years consists of the following:

you dont privide answer choices.

answer - 15% of a inflatation rate is 15% less in cpi