Refer to the Diagram

question 355

Multiple Choice

Refer to the diagram. If the full-employment level of GDP is A, then it would be appropriate fiscal policy for government to

• A) decrease spending and increase taxes.
• B) decrease spending and decrease taxes.
• C) increase spending and increase taxes.
• D) increase spending and decrease taxes.

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Definitions:

Straight Line

A geometric figure formed by two points and extended infinitely in both directions.

Decreasing Rate

Describes a situation where the rate at which something happens or is done reduces over time.

Increasing Rate

A situation where the magnitude or quantity of something grows at a pace that accelerates over a given period of time.

Slope

In mathematics and economics, the measure of the steepness or incline of a line, often representing the rate of change.