When the current short-run equilibrium is to the right of the long-run aggregate supply, appropriate discretionary fiscal policy used to address this problem would be to
A) increase taxes.
B) decrease taxes.
C) increase government spending.
D) decrease the discount rate.

Question

Quizplus · Accepted Answer

When the current short-run equilibrium is to the right of the long-run aggregate supply, it indicates an overheated economy with potential inflationary pressures. Increasing taxes is an appropriate discretionary fiscal policy to cool down the economy by reducing consumer spending and demand.

When the Current Short-Run Equilibrium Is to the Right of the Long-Run