Figure 27-2
-Refer to Figure 27-2. In the graph above, if the economy is at point A, an appropriate fiscal policy by the Congress and the president would be to

Question

Figure 27-2 
-Refer to Figure 27-2. In the graph above, if the economy is at point A, an appropriate fiscal policy by the Congress and the president would be to

Quizplus · Accepted Answer

Point A represents an economic recession, with a low level of output and high unemployment. To address this, the appropriate fiscal policy would be expansionary, aimed at increasing aggregate demand. Increasing government transfer payments, such as unemployment benefits or welfare, would directly inject money into the economy and increase spending by individuals, which would help to increase aggregate demand and stimulate economic growth. Lowering the discount rate of interest, executing an open market sale of government securities or increasing marginal income tax rates would not directly address the problem of low output and high unemployment.

Figure 27-2 -Refer to Figure 27-2. in the Graph Above, If the Above