Exhibit: Fiscal Policy 2 Price level рк O P Fr P LRAS AD₁ SRASI Real GDP per year If discretionary fiscal policy is used to eliminate the gap, policy actions will shift the short-run aggregate supply curve to the left until long-run equilibrium is restored at a price level, P, and output level, Yp. shift the aggregate demand curve to the left until long-run equilibrium is restored at a price level, P, and output level, Yp. shift the aggregate demand curve to the left until long-run equilibrium is restored at a price level, P, and output level, Yp. shift the aggregate demand curve and the short-run aggregate supply curve to the left until long-run equilibrium is restored at a price level Pk and output level, Yp.

Exhibit: Fiscal Policy 2 Price level рк O P Fr P LRAS AD₁ SRASI Real GDP per year If discretionary fiscal policy is used to eliminate the gap, policy actions will shift the short-run aggregate supply curve to the left until long-run equilibrium is restored at a price level, P, and output level, Yp. shift the aggregate demand curve to the left until long-run equilibrium is restored at a price level, P, and output level, Yp. shift the aggregate demand curve to the left until long-run equilibrium is restored at a price level, P, and output level, Yp. shift the aggregate demand curve and the short-run aggregate supply curve to the left until long-run equilibrium is restored at a price level Pk and output level, Yp.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Which of the following is not a predicted outcome of implementing automatic fiscal policy? О а. Reduces the size of the multiplier O b. Helps prevent inflation due to inflationary gaps O C. Moderates the business cycle O d. Decreases the deficit O e. Reduces the effects of economic shocks
Given the aggregate demand function, AD = C+ I, + G +X - IM, a contractionary fiscal policy casues AD to do what? Shift to the left. Causes no shift. Cannot be determined. Shift to the right.
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