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? O increase taxes O contractionary fiscal policy O increase government spending O decrease interest rates
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? O increase taxes O contractionary fiscal policy O increase government spending O decrease interest rates
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
![Figure 16-7
Price
level
P3
a
P₂
P₁
0
LRAS
A
increase taxes
LRAS
8
с
Y₂ Ya
contractionary fiscal policy
O increase government spending
O decrease interest rates
SRAS₁
AD₁
SRAS
AD₂
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?
Real GDP
(trillions of dollars)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb93ab989-c3fc-4c40-b581-b08fc62dbb12%2Fba4afa02-24ce-4ff7-984d-8dbfdd383986%2F2t6qvq3_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Figure 16-7
Price
level
P3
a
P₂
P₁
0
LRAS
A
increase taxes
LRAS
8
с
Y₂ Ya
contractionary fiscal policy
O increase government spending
O decrease interest rates
SRAS₁
AD₁
SRAS
AD₂
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?
Real GDP
(trillions of dollars)
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