Figure 15.2
-Refer to Figure 15.2. Suppose the economy is currently at Point A producing potential output Y₀. If the government increases spending, the economy moves to Point _______ in the short- run and to Point _______ in the long- run.

Question

Figure 15.2 -Refer to Figure 15.2. Suppose the economy is currently at Point A producing potential output Y<sub>0</sub>. If the government increases spending, the economy moves to Point _______ in the short- run and to Point _______ in the long- run. A) B; C B) C; B C) B; D D) D; E

Quizplus · Accepted Answer

If the government increases spending, the economy will move to Point B in the short-run (as it moves along the SRAS1 curve to a higher level of output), and then to Point C in the long-run (as the SRAS curve shifts to the right, bringing the economy back to potential output at YS2U2B0).

Figure 15.2 -Refer to Figure 15.2. Suppose the Economy Is Currently at Currently