Exhibit 20A-2 Macro AD/AS Models In Panel (a) of Exhibit 20A-2, an expansionary Keynesian government stabilization policy designed to move the economy from Y₁ to Y_p would shift the: A) aggregate demand curve (A D)to the left. B) aggregate demand curve (A D) to the right. C) SRAS rightward. D) LRAS rightward.

Question

Quizplus · Accepted Answer

An expansionary Keynesian policy involves increasing government spending or cutting taxes to increase aggregate demand (AD) and stimulate economic activity. This would shift the AD curve to the right from AD1 to AD2, moving the economy from Y to Y_p. Therefore, the correct answer is B, as the AD curve would shift to the right. The SRAS and LRAS curves would remain unchanged.

Exhibit 20A-2 Macro AD/AS Models in Panel (A) of Exhibit