Scenario 1 In 2007-09, the U.S. economy went through its worst economic downturn in 30 years. As a consequence of the sharp increase in the price of housing in the U.S. in the mid-2000s, a rapid increase in the demand for oil drove up oil prices. Additionally, the collapse of the housing market, which led to Lehman Brothers' bankruptcy, generated a financial crisis that reduced private spending. Refer to scenario 1 and question 68. In February 2009, the Congress approved the American Recovery and Reinvestment Act (ARRA) put forward by President Obama, consisting of US$ 78 billion in fiscal stimulus. Starting from the equilibrium at point B, how did the ARRA affect the economy? O The fiscal stimulus reduced government expenditure, shifting the AD curve to the right. The fiscal stimulus increased government expenditure, shifting the SRAS curve to the right. O The fiscal stimulus increased government expenditure, shifting the AD curve to the right. The fiscal stimulus reduced government expenditure, shifting the SRAS curve to the right.
Scenario 1 In 2007-09, the U.S. economy went through its worst economic downturn in 30 years. As a consequence of the sharp increase in the price of housing in the U.S. in the mid-2000s, a rapid increase in the demand for oil drove up oil prices. Additionally, the collapse of the housing market, which led to Lehman Brothers' bankruptcy, generated a financial crisis that reduced private spending. Refer to scenario 1 and question 68. In February 2009, the Congress approved the American Recovery and Reinvestment Act (ARRA) put forward by President Obama, consisting of US$ 78 billion in fiscal stimulus. Starting from the equilibrium at point B, how did the ARRA affect the economy? O The fiscal stimulus reduced government expenditure, shifting the AD curve to the right. The fiscal stimulus increased government expenditure, shifting the SRAS curve to the right. O The fiscal stimulus increased government expenditure, shifting the AD curve to the right. The fiscal stimulus reduced government expenditure, shifting the SRAS curve to the right.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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