Exhibit 16A-1 Policy Alternatives in Panel (A)of Exhibit 16A-1

question 18

Multiple Choice

Exhibit 16A-1 Policy Alternatives In Panel (a) of Exhibit 16A-1, the economy is initially in short-run equilibrium at real GDP level Y₁ and price level P₂. Classical theory argues:

• A)the federal government must shift AD₁ to AD₂ as shown in Panel (b).
• B)the federal government must shift SRAS₁ to SRAS₂.
• C)that SRAS₁ will shift to SRAS₂ without government intervention.
• D)that AD will shift rightward without government intervention.

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Definitions:

Salvage Value

The estimated resale value of an asset at the end of its useful life.

Annual Retirement Income

The total amount of income a person receives in one year after retiring from work, which can come from pensions, savings, investments, or other sources.

After Tax

Refers to the amount of money or income that remains after all federal, state, and withholding taxes have been deducted.