Figure 16-7 Price level P₁ P₂ P₁ LRAS LRAS (8 C SRAS, SRAS AD₁ AD₂ 0 Y₂ Ya Real GDP (trillions of dollars) Refer to Figure 16-7. Given that the economy has moved from A to B in the graph above, which of the following would be the appropriate fiscal policy to achieve potential GDP? increase taxes contractionary fiscal policy O increase government spending decrease interest rates

Figure 16-7 Price level P₁ P₂ P₁ LRAS LRAS (8 C SRAS, SRAS AD₁ AD₂ 0 Y₂ Ya Real GDP (trillions of dollars) Refer to Figure 16-7. Given that the economy has moved from A to B in the graph above, which of the following would be the appropriate fiscal policy to achieve potential GDP? increase taxes contractionary fiscal policy O increase government spending decrease interest rates

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Figure 16-7
Price
level
P3
P₂
P₁
a
LRAS
A
LRAS
8
с
SRAS₁
SRAS
AD₂
0
Y₂ Ya
Real GDP
(trillions of dollars)
Refer to Figure 16-7. Given that the economy has moved from A to B in the graph above, which
of the following would be the appropriate fiscal policy to achieve potential GDP?
increase taxes
contractionary fiscal policy
O increase government spending
O decrease interest rates
AD₁

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