The diagram presents an Aggregate Demand and Supply Model. It shows the Short-Run Aggregate Supply (SRAS) curve, and two Aggregate Demand curves, AD₁ and AD₂, indicating an increase in Aggregate Demand from AD₁ to AD₂. This shift results in changes in the Price Level from PL₁ to PL₂, and in Real GDP from Y₁ to Y₂.**Explanation of Diagram:**- The vertical axis represents the Price Level.- The horizontal axis represents Real GDP.- The SRAS line slopes upward from left to right.- AD₁ and AD₂ are downward-sloping curves, with AD₂ shifted to the right of AD₁.**Question:**The Aggregate Demand Model shows an increase in Aggregate Demand or GDP. Which type of Fiscal Policy was used and why?- ○ Contractionary Policy to increase GDP and Increase Inflation- ○ Contractionary Policy to decrease GDP and lower the unemployment rate- ○ Expansionary Policy to raise GDP and lower the unemployment rate- ○ Expansionary Policy to raise GDP and lower Inflation

The given figure shows the increase in aggregate demand. Prices and output are increased.

SRAS PL2 PL AD2 AD Y,Y2 REAL GDP The Aggregate Demand Model shows an increase in Aggregate Demand or GDP, Which type of Fiscal Policy was used and why? O Contractionary Policy to increase GDP and Increase Inflation O Contractionary Policy to decrease GDP and lower the unemployment rate O Expansionary Policy to raise GDP and lower the unemployment rate O Expansionary Policy to raise GDP and lower Inflation PRICE LEVEL

SRAS PL2 PL AD2 AD Y,Y2 REAL GDP The Aggregate Demand Model shows an increase in Aggregate Demand or GDP, Which type of Fiscal Policy was used and why? O Contractionary Policy to increase GDP and Increase Inflation O Contractionary Policy to decrease GDP and lower the unemployment rate O Expansionary Policy to raise GDP and lower the unemployment rate O Expansionary Policy to raise GDP and lower Inflation PRICE LEVEL

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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2. Assume that there is an increase in taxes Which determinant? A AD or A AS? P LRAS SRAS P₁ AD What happens to: Price Level Real GDP Inflation Unemployment Economic Growth Y YF
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