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(Figure: Aggregate Demand and Supply) the Above Graph Depicts an Economy

Question 88

Multiple Choice

(Figure: Aggregate Demand and Supply) The above graph depicts an economy originally in equilibrium at point e. Assume that the government uses expansionary fiscal policy. Which of the following statements is true? (Figure: Aggregate Demand and Supply)  The above graph depicts an economy originally in equilibrium at point e. Assume that the government uses expansionary fiscal policy. Which of the following statements is true?   A)  The movement from point a to point b is due to increased consumer spending brought about by increased government spending and/or lower taxes. B)  The movement from point e to point a is due to workers and suppliers adjusting their expectations to lower price levels. C)  The movement from point a to point b is due to workers and suppliers adjusting their expectations to higher price levels. D)  The movement from point e to point a is due to decreased consumer spending brought about by increased government spending and/or lower taxes.


A) The movement from point a to point b is due to increased consumer spending brought about by increased government spending and/or lower taxes.
B) The movement from point e to point a is due to workers and suppliers adjusting their expectations to lower price levels.
C) The movement from point a to point b is due to workers and suppliers adjusting their expectations to higher price levels.
D) The movement from point e to point a is due to decreased consumer spending brought about by increased government spending and/or lower taxes.

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