Figure 27-5
-Refer to Figure 27-5. 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 pursue
A) expansionary fiscal policy.
B) contractionary fiscal policy.
C) expansionary monetary policy.
D) contractionary monetary policy.
E) contractionary automatic stabilizers.

Question

Figure 27-5 
-Refer to Figure 27-5. 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 pursue
A) expansionary fiscal policy. 
B) contractionary fiscal policy. 
C) expansionary monetary policy. 
D) contractionary monetary policy. 
E) contractionary automatic stabilizers.

Quizplus · Accepted Answer

If the economy is moving from point A to point B, it suggests a decrease in output or an increase in unemployment. To counteract this, Congress and the president would likely pursue expansionary fiscal policy to stimulate the economy.

Figure 27-5 -Refer to Figure 27-5. in the Dynamic Model of AD-AS