Exhibit 15-1

-Refer to the graph in the exhibit.According to policymakers who favour an active approach to policy, how can the economy attain equilibrium at potential output?
A) by shifting the SRAS curve to the left
B) by shifting the SRAS curve to the right
C) by shifting the aggregate demand curve to the right
D) by decreasing the money supply or by decreasing government spending

Question

Exhibit 15-1
 
-Refer to the graph in the exhibit.According to policymakers who favour an active approach to policy, how can the economy attain equilibrium at potential output?  
A) by shifting the SRAS curve to the left 
B) by shifting the SRAS curve to the right 
C) by shifting the aggregate demand curve to the right 
D) by decreasing the money supply or by decreasing government spending

Quizplus · Accepted Answer

Policymakers who favour an active approach to policy believe that the economy can attain equilibrium at potential output by shifting the aggregate demand curve to the right, which will increase both the price level and real GDP. This can be achieved through monetary or fiscal policy interventions such as increasing government spending or decreasing taxes. Shifting the SRAS curve to the right or left would result in changes in the price level or real GDP, but may not necessarily lead to equilibrium at potential output. Decreasing the money supply or government spending would decrease aggregate demand, making it harder to reach potential output.

Exhibit 15-1 -Refer to the Graph in the Exhibit.According to Policymakers Who