Exhibit 16A-1 Policy Alternatives in Panel (B)of Exhibit 16A-1

Exhibit 16A-1 Policy Alternatives In Panel (b) of Exhibit 16A-1, the economy is initially in short-run equilibrium at real GDP level Y₁ and price level P₂. If the federal government decides to intervene, it would most likely:

A) increase taxes.
B) decrease the money supply.
C) increase the level of government spending for goods and services.
D) decrease the level of government spending for goods and services.