The graph shown displays various economic outcomes. If the government were to successfully enact expansionary fiscal policy, the economy's equilibrium would most likely move from:
A) A to B.
B) B to C.
C) C to D.
D) D to B.

Question

The graph shown displays various economic outcomes.  If the government were to successfully enact expansionary fiscal policy, the economy's equilibrium would most likely move from:
A) A to B. 
B) B to C. 
C) C to D. 
D) D to B.

Quizplus · Accepted Answer

Expansionary fiscal policy is designed to increase demand and stimulate economic growth. This can be achieved through increased government spending or decreased taxes. As a result, aggregate demand will shift to the right, leading to an increase in equilibrium output and price level. In the graph, this can be seen as a movement from point B to point C, where output increases and price level increases. Therefore, the correct choice is B.

The Graph Shown Displays Various Economic Outcomes