Figure 27-1

-Refer to Figure 27-1.In the graph above,if the economy is at point A,an appropriate fiscal policy by the Congress and the president would be to

Question

Figure 27-1
 
-Refer to Figure 27-1.In the graph above,if the economy is at point A,an appropriate fiscal policy by the Congress and the president would be to

Quizplus · Accepted Answer

At point A, the economy is in a recessionary gap where output is below potential output. To stimulate the economy, the appropriate fiscal policy is to increase government expenditures to shift the aggregate demand curve to the right and close the output gap. Decreasing the required reserve ratio or selling government securities would be monetary policy tools to address inflationary pressures, not a recession. Decreasing transfer payments would decrease aggregate demand and exacerbate the output gap.

Figure 27-1 -Refer to Figure 27-1.In the Graph Above,if the Economy Is