Refer to the information provided in Figure 12.8 below to answer the questions that follow.
Figure 12.8
-Refer to Figure 12.8.Suppose the economy is currently at Point A producing potential output Y₀.If the government increases spending,the economy moves to Point ________ in the short-run and to Point ________ in the long-run.

Question

Refer to the information provided in Figure 12.8 below to answer the questions that follow.

Figure 12.8
-Refer to Figure 12.8.Suppose the economy is currently at Point A producing potential output Y₀.If the government increases spending,the economy moves to Point ________ in the short-run and to Point ________ in the long-run.

Quizplus · Accepted Answer

In the short-run, increased government spending shifts the aggregate demand curve rightward, moving the economy from Point A to Point B. In the long-run, the economy adjusts back to potential output, moving from Point B to Point C.

Refer to the Information Provided in Figure 12