LRASPricelevelAS,AS,p.aSAD,AD1龍Yc Yf YoReal GDP per yearRefer to the figure above. If the economy is at point b, to close theoutput gap the appropriate fiscal policy would includeO increasing government purchases and/or increasing transfer payments.O decreasing government purchases and/or increasing transfer payments.O increasing government purchases and/or decreasing transfer payments.decreasing government purchases and/or decreasing transfer payments.C.

When the economy is at point B, the gap is inflationary gap. The actual output is higher than…

Answered: Refer to the figure above. If the…

Refer to the figure above. If the economy is at point b, to close the output gap the appropriate fiscal policy would include

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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Concept explainers

Fiscal Policy and Money Market

Fiscal policy is one of the important tools that is used by the government to control inflation or aggregate demand in the economy. Under this policy, there are two rules which are used by the government, one is the expenditure of the government and the other is the taxation or income of the government which it collects from the public.

Question

100%

LRAS
Price
level
AS,
AS,
p.
a
SAD,
AD1
龍
Yc Yf Yo
Real GDP per year
Refer to the figure above. If the economy is at point b, to close the
output gap the appropriate fiscal policy would include
O increasing government purchases and/or increasing transfer payments.
O decreasing government purchases and/or increasing transfer payments.
O increasing government purchases and/or decreasing transfer payments.
decreasing government purchases and/or decreasing transfer payments.
C.

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