Refer to the information provided in Figure 27.3 below to answer the question(s) that follow. Figure 27.3
-Refer to Figure 27.3. Assume the economy is at Point A. Higher oil prices shift the aggregate supply curve to AS₂. If the government decides to counter the effects of higher oil prices by increasing government spending, then the price level will be ________ than P₂ and output will be ________ than Y₂.

Question

Refer to the information provided in Figure 27.3 below to answer the question(s) that follow.

Figure 27.3
-Refer to Figure 27.3. Assume the economy is at Point A. Higher oil prices shift the aggregate supply curve to AS₂. If the government decides to counter the effects of higher oil prices by increasing government spending, then the price level will be ________ than P₂ and output will be ________ than Y₂.

Quizplus · Accepted Answer

Increasing government spending shifts the aggregate demand curve to the right, leading to a higher price level and greater output than P2 and Y2, respectively.

Refer to the Information Provided in Figure 27