Figure 11.2 shows the relationship between the price level and real GDP.Suppose the economy is currently at e'.If the government implements a contractionary fiscal policy,the economy would land up at:

A)point e*.
B)point e'.
C)point e''.
D)a point between e* and e'' on the potential output line.
E)a point between e* and e' on the short-run aggregate supply line.

Question

Figure 11.2 shows the relationship between the price level and real GDP.Suppose the economy is currently at e'.If the government implements a contractionary fiscal policy,the economy would land up at:

A)point e*. 
B)point e'. 
C)point e''. 
D)a point between e* and e'' on the potential output line. 
E)a point between e* and e' on the short-run aggregate supply line.

Quizplus · Accepted Answer

The Answer of Figure 11.2 shows the relationship between the price level and real GDP.Suppose the economy is currently at e'.If the government implements a contractionary fiscal policy,the economy would land up at:

A)point e*. 
B)point e'. 
C)point e''. 
D)a point between e* and e'' on the potential output line. 
E)a point between e* and e' on the short-run aggregate supply line.

Figure 112 Shows the Relationship Between the Price Level and Real