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- Refer to the Above Diagram

Question 4

Multiple Choice

- Refer to the above diagram. The economy is at equilibrium at point B. What fiscal policy would increase real GDP? A) Increase aggregate demand from AD<sub>2</sub> to AD<sub>1</sub> by decreasing taxes. B) Decrease aggregate demand from AD<sub>2</sub> to AD<sub>3</sub> by increasing government spending. C) Decrease aggregate demand from AD<sub>2</sub> to AD<sub>3</sub> by decreasing government spending. D) Increase aggregate demand from AD<sub>2</sub> to AD<sub>3</sub> by decreasing taxes.
- Refer to the above diagram. The economy is at equilibrium at point B. What fiscal policy would increase real GDP?


A) Increase aggregate demand from AD2 to AD1 by decreasing taxes.
B) Decrease aggregate demand from AD2 to AD3 by increasing government spending.
C) Decrease aggregate demand from AD2 to AD3 by decreasing government spending.
D) Increase aggregate demand from AD2 to AD3 by decreasing taxes.

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