-Refer to the above figure. Suppose the economy is at point A. By the proper use of fiscal policy, the government can
A) boost taxes to shift LRAS through point A.
B) cut income tax rates to get the economy to point B.
C) raise income tax rates to get the economy to point C.
D) reduce government spending to get the economy to point D.

Question

-Refer to the above figure. Suppose the economy is at point A. By the proper use of fiscal policy, the government can
A) boost taxes to shift LRAS through point A. 
B) cut income tax rates to get the economy to point B. 
C) raise income tax rates to get the economy to point C. 
D) reduce government spending to get the economy to point D.

Quizplus · Accepted Answer

To move the economy from point A to point B, reducing income tax rates can stimulate economic activity by increasing consumer spending and investment, which can help in moving the economy towards full employment (represented by point B).

-Refer to the Above Figure