Figure 4-10

-In Figure 4-10 above,expansionary fiscal policy accommodated by the Fed can be pictured as a movement from points
A)A to D.
B)A to C.
C)D to B.
D)B to D.
E)A to B.

Question

Figure 4-10
 
-In Figure 4-10 above,expansionary fiscal policy accommodated by the Fed can be pictured as a movement from points
A)A to D. 
B)A to C. 
C)D to B. 
D)B to D. 
E)A to B.

Quizplus · Accepted Answer

Expansionary fiscal policy is shown by a shift of the aggregate demand curve to the right. This shift from AD1 to AD2 can be achieved by increasing government spending, reducing taxes, or increasing transfer payments. The Fed can accommodate this policy by increasing the money supply and lowering interest rates, shifting the aggregate demand curve further to the right. This movement from point A to point B represents an expansionary fiscal policy accommodated by the Fed.

Figure 4-10 -In Figure 4-10 Above,expansionary Fiscal Policy Accommodated by the Fed