Refer to the above graph. The economy is initially at output level Y₁. To close the output gap with fiscal policy, policymakers should A B C raise interest rates. increase government spending. raise sales tax to encourage savings. loosen environmental regulations to lower production costs.
Refer to the above graph. The economy is initially at output level Y₁. To close the output gap with fiscal policy, policymakers should A B C raise interest rates. increase government spending. raise sales tax to encourage savings. loosen environmental regulations to lower production costs.
Chapter15: Fiscal Policy
Section: Chapter Questions
Problem 1SQ
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Transcribed Image Text:Refer to the above graph. The economy is initially at output level Y₁. To close the output gap with fiscal policy, policymakers
should
A
B
C
D
raise interest rates.
increase government spending.
raise sales tax to encourage savings.
loosen environmental regulations to lower production costs.
Transcribed Image Text:Price level
P3
P₁
P₂
LRAS
Yp
C
B
Y₁
A
AD₂
SRAS
AD₁
Real GDP per year
Refer to the above graph. The economy is initially at output level Y₁. To close the output gap with fiscal policy, policymakers
should
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