Question 1
Refer to the information provided in Figure 27.2 below to answer the question(s) that follow.


Refer to Figure 27.2. The output multiplier is smallest when the aggregate demand curve shifts from
◦
AD1 to
AD2.
◦
AD3 to
AD4.
◦
AD5 to
AD6.
◦ The output multiplier is the same for all
AD curve shifts shown in the figure.
Question 2
Refer to the information provided in Figure 27.2 below to answer the question(s) that follow.


Refer to Figure 27.2. Firms respond to a decrease in net taxes by mostly raising their prices when the aggregate demand curve shifts from
◦
AD1 to
AD2.
◦
AD3 to
AD4.
◦
AD5 to
AD6.
◦
AD6 to
AD1.