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Question 55

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Use the following to answer questions:
Figure: Fiscal Policy I Use the following to answer questions: Figure: Fiscal Policy I -(Figure: Fiscal Policy I) Look at the figure Fiscal Policy I. Suppose that this economy is in equilibrium at E<sub>2</sub>. If there is a decrease in government purchases, _____ will shift to the _____, causing a(n) _____ in the price level and a(n) _____ in real GDP. A) AD<sub>2;</sub> left; increase; decrease B) AD<sub>2;</sub> left; decrease; decrease C) AD<sub>1;</sub> right; increase; increase D) AD<sub>1;</sub> right; decrease; increase
-(Figure: Fiscal Policy I) Look at the figure Fiscal Policy I. Suppose that this economy is in equilibrium at E2. If there is a decrease in government purchases, _____ will shift to the _____, causing a(n) _____ in the price level and a(n) _____ in real GDP.


A) AD2; left; increase; decrease
B) AD2; left; decrease; decrease
C) AD1; right; increase; increase
D) AD1; right; decrease; increase

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