A) do nothing since the economy appears to be achieving full-employment real output.
B) increase taxes and reduce government spending to shift the aggregate demand curve rightward from AD $A D _ { 2 } \text { to } A D _ { 3 }$
C) increase taxes on businesses to shift the aggregate supply curve rightward to reduce the price level.
D) reduce taxes and increase government spending to shift the aggregate demand curve from $A D _ { 2 } \text { to } A D _ { 1 }$

Question

A) do nothing since the economy appears to be achieving full-employment real output. 
B) increase taxes and reduce government spending to shift the aggregate demand curve rightward from AD $A D _ { 2 } \text { to } A D _ { 3 }$ 
C) increase taxes on businesses to shift the aggregate supply curve rightward to reduce the price level. 
D) reduce taxes and increase government spending to shift the aggregate demand curve from $A D _ { 2 } \text { to } A D _ { 1 }$

Quizplus · Accepted Answer

Since the economy appears to be achieving full-employment real output, there is no need for fiscal policy intervention. The economy is operating at its potential level of output, so any attempts to shift the aggregate demand or supply curve could potentially cause inflationary pressures or other negative consequences. Therefore, the best choice in this scenario is to do nothing.

A) Do Nothing Since the Economy Appears to Be Achieving AD2 to AD3A D _ { 2 } \text { to } A D _ { 3 }AD2​ to AD3​

A) Do Nothing Since the Economy Appears to Be Achieving $A D _ { 2 } \text { to } A D _ { 3 }$