Refer to Figure 16-7. Given that the economy has moved from A to B in the graph above, which of the following would be the appropriate fiscal policy to achieve potential GDP? O increase taxes O contractionary fiscal policy O increase government spending O decrease interest rates

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Figure 16-7
Price
level
P3
a
P₂
P₁
0
LRAS
A
increase taxes
LRAS
8
с
Y₂ Ya
contractionary fiscal policy
O increase government spending
O decrease interest rates
SRAS₁
AD₁
SRAS
AD₂
Refer to Figure 16-7. Given that the economy has moved from A to B in the graph above, which
of the following would be the appropriate fiscal policy to achieve potential GDP?
Real GDP
(trillions of dollars)
Transcribed Image Text:Figure 16-7 Price level P3 a P₂ P₁ 0 LRAS A increase taxes LRAS 8 с Y₂ Ya contractionary fiscal policy O increase government spending O decrease interest rates SRAS₁ AD₁ SRAS AD₂ Refer to Figure 16-7. Given that the economy has moved from A to B in the graph above, which of the following would be the appropriate fiscal policy to achieve potential GDP? Real GDP (trillions of dollars)
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