- Refer to the above diagram, in which Q_f is the full-employment output. If the economy's current aggregate demand curve is AD₃, it would be appropriate for the government to:

Question

Quizplus · Accepted Answer

If the aggregate demand curve is at AD3, it indicates that the economy is experiencing demand-pull inflation, as it is beyond the full-employment output (Qf). To counteract this, the government should reduce aggregate demand by either reducing government expenditures or increasing taxes.

- Refer to the Above Diagram, in Which Qf Is

- Refer to the Above Diagram, in Which Q_f Is