Figure: Aggregate Demand Shifts 2 Refer to the Figure

question 12

Multiple Choice

Figure: Aggregate Demand Shifts 2 Refer to the figure. Suppose the economy is initially at point A in the diagram. If a decrease in investment spending causes a shift of the AD curve from AD₁ to AD₂, then the government can avoid a short-run recession by:

• A) increasing taxes so that the AD curve shifts back to AD₁.
• B) increasing taxes so that the AD curve shifts further in to AD₃.
• C) increasing government spending so that the AD curve shifts back to AD₁.
• D) increasing government spending so that the AD curve shifts further in to AD₃.

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A developmental phase ranging approximately from the late teens through the twenties, characterized by exploration and uncertainty in various aspects of life such as love and work.

Financially Stable

The state of having sufficient financial resources to manage expenses and withstand economic fluctuations without undue stress.

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The profession or field of work someone has selected or aims to work in, often after careful consideration or based on one's interests and values.

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The amount of force a muscle or group of muscles can exert against resistance in a single effort.