The Graph Shown Displays Various Economic Outcomes

question 60

Multiple Choice

The graph shown displays various economic outcomes. If the economy is currently at equilibrium B, and the government enacts contractionary fiscal policy, in the short run the economy will most likely:

• A) move to equilibrium A.
• B) remain at equilibrium B.
• C) move to equilibrium C.
• D) move to equilibrium D.

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Definitions:

Food Stamps

Government-issued vouchers used to purchase groceries by individuals and families in need, part of a social assistance program.

Supply And Demand Analysis

An economic model used to understand the pricing and quantity of goods in a market by examining how the availability of a product (supply) and the desire for it (demand) interact.

Demand Curve

The demand curve is a graphical representation showing the relationship between the price of a good or service and the quantity demanded by consumers within a given period.

Reservation Price

The maximum price a consumer is willing to pay for a good or service.