Refer to the information provided in Figure 12.2 below to answer the questions that follow. Figure 12.2
-Refer to Figure 12.2. In response to an increase in government spending, the Fed would increase the interest rate by the greatest amount when the aggregate demand curve shifts from

Question

Refer to the information provided in Figure 12.2 below to answer the questions that follow.

Figure 12.2
-Refer to Figure 12.2. In response to an increase in government spending, the Fed would increase the interest rate by the greatest amount when the aggregate demand curve shifts from

Quizplus · Accepted Answer

When the aggregate demand curve shifts from AD₅ to AD₆, there is a significant increase in the level of output demanded, which requires an increase in interest rates to prevent inflation from occurring. Therefore, the Fed would increase the interest rate by the greatest amount in response to this shift.

Refer to the Information Provided in Figure 12