Figure 18-2
-Refer to Figure 18-2.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,Congress and the president would most likely

Question

Figure 18-2 
-Refer to Figure 18-2.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,Congress and the president would most likely

Quizplus · Accepted Answer

Point B represents a higher level of output and a higher price level than point A. This indicates that there is a need for an increase in aggregate demand. The best way to do this would be to increase government spending (choice B) as it would increase consumer demand and boost economic activity. Decreasing government spending, increasing oil prices, increasing taxes or lowering interest rates would all have a contractionary effect on the economy and would worsen the situation.

Figure 18-2 -Refer to Figure 18-2.In the Dynamic Model of AD-AS in of AD-AS