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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Definitions:

Carbon Monoxide Poisoning

A potentially fatal condition caused by inhaling carbon monoxide gas, leading to symptoms such as headache, dizziness, and nausea, due to reduced oxygen carrying capacity of blood.

Smoke Inhalation

The act of breathing in combustion products during exposure to fire, which can lead to respiratory distress and other health issues.

Pulse Oximetry

A non-invasive method to monitor the oxygen saturation level of the blood using a device usually clipped to a finger.