Figure 16-1
-Refer to Figure 16-1. Consider point A where inflation is relatively high and unemployment is relatively low. In order to move down the curve toward point B, what fiscal policy measures should the policymakers undertake?
A) Decrease taxes and government spending
B) Increase taxes and government spending
C) Increase taxes and decrease government spending
D) Decrease taxes and increase government spending

Question

Figure 16-1 
-Refer to Figure 16-1. Consider point A where inflation is relatively high and unemployment is relatively low. In order to move down the curve toward point B, what fiscal policy measures should the policymakers undertake?
A) Decrease taxes and government spending 
B) Increase taxes and government spending 
C) Increase taxes and decrease government spending 
D) Decrease taxes and increase government spending

Quizplus · Accepted Answer

To move down the curve from point A to point B, policymakers should aim to reduce inflation and increase unemployment. Increasing taxes and decreasing government spending would reduce aggregate demand, helping to lower inflation and potentially increase unemployment, thus moving down the curve.

Figure 16-1 -Refer to Figure 16-1. Consider Point a Where Inflation Is