Refer to the information provided in Figure 11.8 below to answer the questions that follow. Figure 11.8
-Refer to Figure 11.8. For this economy to produce at Point B and sustain it without inflation,
A) the price of oil must increase.
B) government spending must increase.
C) government spending must decrease.
D) potential output must increase.

Question

Refer to the information provided in Figure 11.8 below to answer the questions that follow.  Figure 11.8
-Refer to Figure 11.8. For this economy to produce at Point B and sustain it without inflation,
A) the price of oil must increase. 
B) government spending must increase. 
C) government spending must decrease. 
D) potential output must increase.

Quizplus · Accepted Answer

Point B represents the potential output of the economy, which is the maximum sustainable output without causing inflation. To sustain Point B without inflation, the economy must increase its potential output, which can be achieved through investments in technology, education, and infrastructure. Therefore, the correct choice is D, potential output must increase. Choices A and B are incorrect because they do not directly address the issue of sustaining Point B without inflation, and choice C is incorrect because decreasing government spending could lead to a contraction in the economy and a decrease in output.

Refer to the Information Provided in Figure 11