Figure 18-2

-Refer to Figure 18-2.In the graph above,if the economy is at point A,an appropriate fiscal policy by the Congress and the president would be to

Question

Figure 18-2
 
-Refer to Figure 18-2.In the graph above,if the economy is at point A,an appropriate fiscal policy by the Congress and the president would be to

Quizplus · Accepted Answer

At point A, the economy is in a recessionary gap, with output below potential GDP. To close this gap and stimulate economic growth, an appropriate fiscal policy would be to increase government expenditures. This would increase aggregate demand, creating more jobs and increasing output. The other choices (decreasing the required reserve ratio, selling government securities, and decreasing transfer payments) are tools used by monetary policy, not fiscal policy, and would not be appropriate in this situation.

Figure 18-2 -Refer to Figure 18-2.In the Graph Above,if the Economy Is