Figure 12-2 -Refer to Figure 12-2. If Discretionary Fiscal Policy Is Used

question 75

Multiple Choice

Figure 12-2
-Refer to Figure 12-2. If discretionary fiscal policy is used to eliminate the gap, policy actions
Will

• A) shift the aggregate demand curve to the left until long-run equilibrium is restored at a price level, P_j and output level, Y_p.
• B) shift the aggregate demand curve and the short-run aggregate supply curve to the left until long-run equilibrium is restored at a price level P_k and output level, Y_p.
• C) shift the aggregate demand curve to the left until long-run equilibrium is restored at a price level, P_r and output level, Y_p.
• D) shift the short-run aggregate supply curve to the left until long-run equilibrium is restored at a price level, P_r and output level, Y_p.

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Definitions:

Substantial Performance

A legal concept indicating that a party has fulfilled enough of its contractual obligations to warrant payment, even if some minor specifications are not met.

Doctrine

A doctrine is a set of principles or beliefs, especially in legal contexts, establishing a particular rule of law or policy guidance.

Good Faith

The principle of honesty and sincerity in dealings and transactions, free of intent to deceive or defraud.

Complete Performance

The full and exact fulfilment of contractual obligations or tasks as agreed.