-Refer to Figure 11.2. Discretionary fiscal policy aimed at AD management:
A) moves the economy along the BB function in panel b).
B) shifts the BB function up or down, changing the structural balance (SB
B) to shift AD.
C) changes the slope of the BB function through changes in the net tax rate and changes the slope of AD.
D) B and/or C but not

Question

-Refer to Figure 11.2. Discretionary fiscal policy aimed at AD management:
A) moves the economy along the BB function in panel b). 
B) shifts the BB function up or down, changing the structural balance (SB
B) to shift AD. 
C) changes the slope of the BB function through changes in the net tax rate and changes the slope of AD. 
D) B and/or C but not

Quizplus · Accepted Answer

Discretionary fiscal policy aimed at managing aggregate demand (AD) can involve changing government spending and taxation, which can shift the structural balance (SBB) and thus shift AD (option B). It can also involve changes in the net tax rate, affecting the slope of the BB function and consequently the slope of AD (option C). Therefore, both B and C are correct actions of discretionary fiscal policy in managing AD, making D the correct choice.