Solved

Figure 12-2 -Refer to Figure 12-2. If Discretionary Fiscal Policy Is Used

Question 89

Multiple Choice

Figure 12-2
-Refer to Figure 12-2. If discretionary fiscal policy is used to eliminate the gap, policy actions Jwill

A) shift the aggregate demand curve to the left until long-run equilibrium is restored at a price level, P_j and output level, Y_p.
B) shift the aggregate demand curve and the short-run aggregate supply curve to the left until long-run equilibrium is restored at a price level P_k and output level, Y_p.
C) shift the aggregate demand curve to the left until long-run equilibrium is restored at a price level, P_r and output level, Y_p.
D) shift the short-run aggregate supply curve to the left until long-run equilibrium is restored at a price level, P_rand output level, Y_p.