Price Level AD AD₁ AD₂ AD₂ AS Real GDP Suppose an economy's full employment output is at the level Q₁, and the economy's current aggregate demand is represented by AD2. If the government swiftly implements contractionary fiscal policy that immediately shifts the economy's aggregate demand to AD₁, the short-to-medium term aggregate demand would be most closely represented by
Price Level AD AD₁ AD₂ AD₂ AS Real GDP Suppose an economy's full employment output is at the level Q₁, and the economy's current aggregate demand is represented by AD2. If the government swiftly implements contractionary fiscal policy that immediately shifts the economy's aggregate demand to AD₁, the short-to-medium term aggregate demand would be most closely represented by
Chapter24: Fiscal Policy
Section: Chapter Questions
Problem 5P
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