The following graph shows the aggregate demand curve (AD), the short-run aggregate supply curve (SRAS), and the long-run aggregate supply curve (LRAS) for a hypothetical economy. PRICE LEVEL 360 LRAS 300 240 180 120 60 0 0 4 8 12 16 REAL GDP (Trillions of dollars) Suppose the economy is in short-run equilibrium. The consistent with full-employment output. SRAS AD 20 20 24 ? of $4 trillion drives unemployment the unemployment rate Suppose public officials are concerned about the $4 trillion gap in the economy and the resulting higher-than-expected aggregate demand. The government has decided to follow a passive approach to policymaking. On the following graph, shift the AD curve, the SRAS curve, or both to show the intended effect of this approach. Tool tip: Click and drag one or both of the curves. Curves will snap into position, so if you try to move the curve and it snaps back to its original position, just try again and drag it a little farther. PRICE LEVEL 360 360 300 SRAS AD 240 180 120 60 60 0 0 4 8 12 16 REAL GDP (Trillions of dollars) AD 20 20 24 SRAS ? Which of the following policies would advocates of an active approach choose to close the gap found on the initial graph? Check all that apply. An increase in taxes A decrease in the reserve requirement set by the Federal Reserve A decrease in the money supply A decrease in government spending
The following graph shows the aggregate demand curve (AD), the short-run aggregate supply curve (SRAS), and the long-run aggregate supply curve (LRAS) for a hypothetical economy. PRICE LEVEL 360 LRAS 300 240 180 120 60 0 0 4 8 12 16 REAL GDP (Trillions of dollars) Suppose the economy is in short-run equilibrium. The consistent with full-employment output. SRAS AD 20 20 24 ? of $4 trillion drives unemployment the unemployment rate Suppose public officials are concerned about the $4 trillion gap in the economy and the resulting higher-than-expected aggregate demand. The government has decided to follow a passive approach to policymaking. On the following graph, shift the AD curve, the SRAS curve, or both to show the intended effect of this approach. Tool tip: Click and drag one or both of the curves. Curves will snap into position, so if you try to move the curve and it snaps back to its original position, just try again and drag it a little farther. PRICE LEVEL 360 360 300 SRAS AD 240 180 120 60 60 0 0 4 8 12 16 REAL GDP (Trillions of dollars) AD 20 20 24 SRAS ? Which of the following policies would advocates of an active approach choose to close the gap found on the initial graph? Check all that apply. An increase in taxes A decrease in the reserve requirement set by the Federal Reserve A decrease in the money supply A decrease in government spending
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:The following graph shows the aggregate demand curve (AD), the short-run aggregate supply curve (SRAS), and the long-run aggregate supply curve
(LRAS) for a hypothetical economy.
PRICE LEVEL
360
LRAS
300
240
180
120
60
0
0
4
8
12
16
REAL GDP (Trillions of dollars)
Suppose the economy is in short-run equilibrium. The
consistent with full-employment output.
SRAS
AD
20
20
24
?
of $4 trillion drives unemployment
the unemployment rate
Suppose public officials are concerned about the $4 trillion gap in the economy and the resulting higher-than-expected aggregate demand. The
government has decided to follow a passive approach to policymaking.
Transcribed Image Text:On the following graph, shift the AD curve, the SRAS curve, or both to show the intended effect of this approach.
Tool tip: Click and drag one or both of the curves. Curves will snap into position, so if you try to move the curve and it snaps back to its original
position, just try again and drag it a little farther.
PRICE LEVEL
360
360
300
SRAS
AD
240
180
120
60
60
0
0
4
8
12
16
REAL GDP (Trillions of dollars)
AD
20
20
24
SRAS
?
Which of the following policies would advocates of an active approach choose to close the gap found on the initial graph? Check all that apply.
An increase in taxes
A decrease in the reserve requirement set by the Federal Reserve
A decrease in the money supply
A decrease in government spending
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