Figure 16-8
-Refer to Figure 16-8.In the graph above,suppose the economy in Year 1 is at point A and is expected in Year 2 to be at point B.Which of the following policies could Congress and the president use to move the economy to point C?
A)increase government purchases
B)decrease government purchases
C)increase income taxes
D)sell Treasury bills

Question

Figure 16-8 
-Refer to Figure 16-8.In the graph above,suppose the economy in Year 1 is at point A and is expected in Year 2 to be at point B.Which of the following policies could Congress and the president use to move the economy to point C?
A)increase government purchases 
B)decrease government purchases 
C)increase income taxes 
D)sell Treasury bills

Quizplus · Accepted Answer

The graph shows that the economy is below its potential output, indicated by the vertical line at point C. Increasing government purchases, shown by a rightward shift in the aggregate demand curve, can help boost the economy and move it closer to its potential output level. Decreasing government purchases, increasing income taxes, or selling Treasury bills would have the opposite effect and likely lead to a further decrease in output.

Figure 16-8 -Refer to Figure 16-8.In the Graph Above,suppose the Economy in the Economy