Figure 27-2

-Refer to Figure 27-2.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,Congress and the president would most likely pursue
A) expansionary fiscal policy.
B) contractionary fiscal policy.
C) expansionary monetary policy.
D) contractionary monetary policy.
E) contractionary automatic stabilizers.

Question

Figure 27-2
 
-Refer to Figure 27-2.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,Congress and the president would most likely pursue
A) expansionary fiscal policy. 
B) contractionary fiscal policy. 
C) expansionary monetary policy. 
D) contractionary monetary policy. 
E) contractionary automatic stabilizers.

Quizplus · Accepted Answer

If the economy is expected to shift from point A to point B, it means that there is a decrease in aggregate demand (AD) and an increase in aggregate supply (AS). This could be due to factors such as a decrease in consumer spending or an increase in productivity. To counteract this, Congress and the president would most likely pursue expansionary fiscal policy, such as increasing government spending or cutting taxes, in order to stimulate aggregate demand and shift the economy towards point B.

Figure 27-2 -Refer to Figure 27-2.In the Dynamic Model of AD-AS in Model