As mentioned in the chapter and in problem 2.7, in 1968, the U.S. government placed a temporary

Question:

As mentioned in the chapter and in problem 2.7, in 1968, the U.S. government placed a temporary 10% surcharge on personal and corporate income in an attempt to prevent the economy from overheating and inflation from accelerating. The graph below shows a possible short-run equilibrium prior to the surcharge. Assume that the economy was already experiencing inflation at this point. Use the graph to illustrate the effect of the surcharge on the economy.