Refer to Figure 16-2. In the dynamic model of AD - AS in the figure above, if th

Question

Refer to Figure 16-2. 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 pursue

contractionary monetary policy.

contractionary automatic stabilizers.

contractionary fiscal policy.

expansionary monetary policy.

expansionary fiscal policy.

contractionary monetary policy.

contractionary automatic stabilizers.

contractionary fiscal policy.

expansionary monetary policy.

expansionary fiscal policy.

Figure 16-2 LRASLRAS2 Price level GDP deflator, 2000 = 100) SRAS SRAS2 102 100 AD2 AD, Real GDP (trillions of 2000 dollars) 0 0.0 10.8 11.0

Explanation / Answer

Answer:- Refer to Figure 16-2. 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 pursue

Correct Answer:- expansionary fiscal policy.

Reason:- expansionary fiscal policy will help to increase the aggregate demand in the economy

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