Author Question: The country of Epsilon has continuous strong economic growth and a steady price level. This ... (Read 114 times)

javeds · **on:** Jun 29, 2018

The country of Epsilon has continuous strong economic growth and a steady price level. This situation is most likely the result of aggregate demand growing ________ aggregate supply.

A) at the same pace as long-run
B) slower than long-run
C) slower than short-run
D) faster than long-run

Question 2

If the government raises the tax on cigarettes, what is the effect on people's incentives and choices?

What will be an ideal response?

ambernicolefink · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

A

Answer to Question 2

The government raises the tax on cigarettes to discourage smoking. With a higher tax the price of cigarettes rises. The opportunity cost of smoking increases, which gives people incentive to cut their consumption of cigarettes.