Use the following to answer questions:
-(Figure: Fiscal Policy Options)Refer to Figure: Fiscal Policy Options.If the aggregate demand curve is AD' :
A) a contractionary fiscal policy may be warranted.
B) an expansionary fiscal policy may be warranted.
C) the economy is in long-run equilibrium.
D) the economy is experiencing an inflationary gap.

Question

Use the following to answer questions: 
-(Figure: Fiscal Policy Options)Refer to Figure: Fiscal Policy Options.If the aggregate demand curve is AD' :
A) a contractionary fiscal policy may be warranted. 
B) an expansionary fiscal policy may be warranted. 
C) the economy is in long-run equilibrium. 
D) the economy is experiencing an inflationary gap.

Quizplus · Accepted Answer

If the aggregate demand curve is at a lower level, an expansionary fiscal policy may be warranted to increase demand and stimulate economic growth.

Use the Following to Answer Questions