Figure 12-1 -Refer to Figure 12-1. If Discretionary Fiscal Policy Is Used

question 116

Multiple Choice

Figure 12-1
-Refer to Figure 12-1. If discretionary fiscal policy is used to eliminate the gap, policy actions
Will

• A) shift the aggregate demand curve to the right until long-run equilibrium is restored at a price level, P₁ and output level, Y_p.
• B) shift the short-run aggregate supply curve to the right until long-run equilibrium is restored at a price level, P₁ and output level, Y_p.
• C) shift the aggregate demand curve to the right until long-run equilibrium is restored at a price level, P₂ and output level, Y_p.
• D) shift the aggregate demand curve and the short-run aggregate supply curve to the right until long-run equilibrium is restored at a price level corresponding to point d and output level, Y_p.

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Definitions:

Social Allergy Effect

A phenomenon where repeated exposure to certain behaviors or habits of others leads to an increasingly negative and irritated reaction over time.

Irritated

Feeling annoyance or discomfort, often due to a specific cause or situation.

Partners' Annoying Habits

Behaviors or actions by a partner in a relationship that are irritating or bothersome to the other person.

Propinquity Effect

The tendency for people to form friendships or romantic relationships with those whom they encounter often, making physical proximity a factor in relationship formation.