Figure 12-1
-Refer to Figure 12-1. In this situation, if policymakers want to close the output gap with fiscal policies that will stimulate aggregate demand, what should they do?

Question

Figure 12-1 
-Refer to Figure 12-1. In this situation, if policymakers want to close the output gap with fiscal policies that will stimulate aggregate demand, what should they do?

Quizplus · Accepted Answer

To close the output gap with fiscal policies that stimulate aggregate demand, policymakers should increase government spending. This will increase the demand for goods and services, thereby increasing aggregate demand and closing the output gap. Options A, C, and D will not have a direct impact on aggregate demand and may even have negative effects on spending and output.

Figure 12-1 -Refer to Figure 12-1. in This Situation, If Policymakers Want