Figure 16-6
-Refer to Figure 16-6.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
A)increase the money supply and decrease the interest rate.
B)increase taxes.
C)increase government spending.
D)increase oil prices.
E)raise interest rates.

Question

Figure 16-6 
-Refer to Figure 16-6.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
A)increase the money supply and decrease the interest rate. 
B)increase taxes. 
C)increase government spending. 
D)increase oil prices. 
E)raise interest rates.

Quizplus · Accepted Answer

If the economy is moving from point A to point B, it suggests an overheating economy with potential inflationary pressures. Increasing taxes would help cool down the economy by reducing aggregate demand.

Figure 16-6 -Refer to Figure 16-6.In the Dynamic Model of AD-AS in of AD-AS