On the graph above,suppose the economy is at point 6.Which sequence of points best illustrates the short-run and then long-run impacts of an "expansionary fiscal contraction"?

Question

Quizplus · Accepted Answer

An "expansionary fiscal contraction" initially reduces demand, moving the economy from point 6 to point 1. In the short run, this may lead to a decrease in output and prices, moving to point 4. In the long run, the economy adjusts, potentially increasing output and moving to point 2.

On the Graph Above,suppose the Economy Is at Point 6