Refer to the above graph. The economy is initially at output level Y₁. If discretionary fiscal policy is used to eliminate the output gap, policy actions will A B C D shift the short-run aggregate supply curve to the left until long-run equilibrium is restored at a price level P₂ an 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 right 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 right until long-run equilibrium is restored at a price level P, and output level Yp.

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Refer to the above graph. The economy is initially at output level Y₁. If discretionary fiscal policy is used to eliminate the
output gap, policy actions will
A
B
C
D
shift the short-run aggregate supply curve to the left until long-run equilibrium is restored at a price level P2 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 right until long-run equilibrium is restored at a price level P, and
output level Y
shift the aggregate demand curve and the short-run aggregate supply curve to the right until long-run
equilibrium is restored at a price level P, and output level Yp.
Transcribed Image Text:Refer to the above graph. The economy is initially at output level Y₁. If discretionary fiscal policy is used to eliminate the output gap, policy actions will A B C D shift the short-run aggregate supply curve to the left until long-run equilibrium is restored at a price level P2 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 right until long-run equilibrium is restored at a price level P, and output level Y shift the aggregate demand curve and the short-run aggregate supply curve to the right until long-run equilibrium is restored at a price level P, and output level Yp.
Price level
P₁
P₁
P₂
LRAS
C
B
Yp
A
AD.
SRAS
AD₁
Y₁
Real GDP per year
Refer to the above graph. The economy is initially at output level Y. If discretionary fiscal policy is used to eliminate the
output gap, policy actions will
Transcribed Image Text:Price level P₁ P₁ P₂ LRAS C B Yp A AD. SRAS AD₁ Y₁ Real GDP per year Refer to the above graph. The economy is initially at output level Y. If discretionary fiscal policy is used to eliminate the output gap, policy actions will
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