2018 Nov (AD/AS) Paper 3 HL
The Government of Country A decides to increase the level of taxation to $34 billion.
(i) Using an AD/AS diagram, explain how this may affect the level of unemployment.
Show a leftward shift of the AD curve with a decrease in output and the PL (price level) and an explanation that as taxes increase there will be a reduction in consumption as consumers have less disposable income. This leads to a decrease in the output level and therefore an increase in unemployment.
No comments:
Post a Comment