Figure 112 Shows the Relationship Between the Price Level and Real

question 27

Multiple Choice

Figure 11.2 shows the relationship between the price level and real GDP.Suppose the economy is currently at e'.If the government implements a contractionary fiscal policy,the economy would land up at:

• A)point e*.
• B)point e'.
• C)point e''.
• D)a point between e* and e'' on the potential output line.
• E)a point between e* and e' on the short-run aggregate supply line.