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 unemployment gap, where the economy is experiencing a recessionary output gap. To close this gap, expansionary fiscal policy is required, which involves increasing government expenditures (answer C) to increase aggregate demand and stimulate economic growth. Decreasing the required reserve ratio (answer A) is a monetary policy tool and selling government securities (answer B) is a monetary policy tool used to decrease the money supply, which would be contractionary measures, and not appropriate in this situation. Decreasing transfer payments (answer D) would also be a contractionary fiscal policy measure and not appropriate in this situation.

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