Figure 12-3 -Refer to Figure 12-3. If the Aggregate Demand Curve Is

Figure 12-3
-Refer to Figure 12-3. If the aggregate demand curve is AD₁, which of the following is the most Jappropriate discretionary fiscal policy to pursue?

A) a contractionary fiscal policy involving reductions in government spending and increases in income tax rates
B) a contractionary fiscal policy involving reductions in government spending and decreases in income tax rates
C) an expansionary fiscal policy involving increases in government spending and increases in investment tax credits
D) an expansionary fiscal policy involving increases in government spending and decreases in investment tax credits