Figure 12-3 -Refer to Figure 12-3. If the Aggregate Demand Curve Is

question 85

Multiple Choice

Figure 12-3
-Refer to Figure 12-3. If the aggregate demand curve is AD₂, which of the following is the most appropriate discretionary fiscal policy to pursue?

• A) a contractionary fiscal policy involving reductions in government spending and decreases in income tax rates
• B) a contractionary fiscal policy involving reductions in government spending and increases in income tax rates
• C) an expansionary fiscal policy involving increases in government spending and increases in income tax rates
• D) an expansionary fiscal policy involving increases in government spending and decreases in income tax rates

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Definitions:

Random Experiment

An experiment or process for which the outcome cannot be predicted with certainty beforehand.

Mutually Exclusive

Two events that cannot occur at the same time, implying that the occurrence of one event precludes the occurrence of the other.

Collectively Exhaustive

Refers to a set of events that covers all possible outcomes, ensuring that no possibilities are left out.

Equally Likely

A term used in probability to describe outcomes that have the same chance of occurring.