Refer to the above graph. The economy is initially at output level Y₁. To close the output gap with fiscal policy, policymakers should A B C raise interest rates. increase government spending. raise sales tax to encourage savings. loosen environmental regulations to lower production costs.

Refer to the above graph. The economy is initially at output level Y₁. To close the output gap with fiscal policy, policymakers should A B C raise interest rates. increase government spending. raise sales tax to encourage savings. loosen environmental regulations to lower production costs.

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

Refer to the above graph. The economy is initially at output level Y₁. To close the output gap with fiscal policy, policymakers
should
A
B
C
D
raise interest rates.
increase government spending.
raise sales tax to encourage savings.
loosen environmental regulations to lower production costs.

Price level
P3
P₁
P₂
LRAS
Yp
C
B
Y₁
A
AD₂
SRAS
AD₁
Real GDP per year
Refer to the above graph. The economy is initially at output level Y₁. To close the output gap with fiscal policy, policymakers
should

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