Figure 18-5

-Refer to Figure 18-5.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

Question

Figure 18-5
 
-Refer to Figure 18-5.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

Quizplus · Accepted Answer

If the economy is expected to move from point A to point B, it suggests that the economy is currently producing at a level below its potential GDP, resulting in high unemployment. To move the economy towards potential GDP, Congress and the president can increase government spending, which will increase aggregate demand and shift the AD curve to the right, leading to an increase in output and employment. Options A, C, D, and E would cause a decrease in aggregate demand, worsening the situation of the economy.

Figure 18-5 -Refer to Figure 18-5.In the Dynamic Model of AD-AS in Model