Figure 7-5

-In Figure 7-5,a fiscal expansion from point A with no initial change in the nominal wage causes a movement to point
A)B.
B)C.
C)D.
D)E.
E)F.

Question

Figure 7-5
 
-In Figure 7-5,a fiscal expansion from point A with no initial change in the nominal wage causes a movement to point
A)B. 
B)C. 
C)D. 
D)E. 
E)F.

Quizplus · Accepted Answer

A fiscal expansion means an increase in government spending and/or a decrease in taxes, both of which will increase aggregate demand. With no initial change in nominal wages, this will result in a movement along the vertical aggregate supply curve to a higher price level and higher output level, which is represented by moving from point A to point B.

Figure 7-5 -In Figure 7-5,a Fiscal Expansion from Point a with No