Use the figure below to answer the following question(s). Figure 14-2 -If the Fed anticipates that the conditions illustrated by AD₁ and SRAS in Figure 14-2 will be present in the near future, it should A)shift to a more restrictive policy. B)shift to a more expansionary policy. C)request that Congress raise tax rates. D)refuse to buy any more U.S.securities.

Question

Quizplus · Accepted Answer

If the Fed anticipates a situation where aggregate demand (AD) is lower than the short-run aggregate supply (SRAS), it indicates a potential recession or economic slowdown. To counteract this, the Fed should adopt a more expansionary policy to stimulate demand and economic activity.

Use the Figure Below to Answer the Following Question(s)