Figure: Aggregate Demand Shifts Refer to the Figure

question 125

Multiple Choice

Figure: Aggregate Demand Shifts Refer to the figure. Suppose the economy is initially at point A in the diagram. If an increase in investment spending causes a shift of the AD curve from AD₁ to AD₄, then the government can avoid a short-run increase in inflation by:

• A) increasing taxes so that the AD curve shifts back to AD₁.
• B) increasing taxes so that the AD curve shifts further out to AD₅.
• C) increasing government spending so that the AD curve shifts back to AD₁.
• D) increasing government spending so that the AD curve shifts further out to AD₅.

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Definitions:

Target Market Segments

Specific groups of potential customers identified by companies as the most likely to purchase their products or services.

Reposition

The strategy of changing the market position of a product or brand, often to target new demographics or market segments.

Chocolate Milk

A sweetened chocolate-flavored variety of traditional milk, often consumed as a beverage or used as a dessert ingredient.

Adult Consumers

Individuals over the age of majority who purchase goods and services for personal use, not necessarily restricted by age in all contexts.