These graphs describe the competitive dynamic model.
Suppose that, in order to finance a government- sponsored health plan, the government needs to increase spending by 10%. The government plans to finance the higher spending with an increase in taxes.
1. As a consequence of this government policy, the aggregate demand functions:
a) shifts right
b) shifts left
c) does not move
2. And the aggregate output supply
a) shifts right
b) shifts left
c) does not move
3. The aggregate supply reflects the fact that
a) consumers are willing to work more
b) consumers are willing to work less
c) consumers do not change their labor decision