Figure 32-2 Suppose That Figure 32-2 Shows the Effects of Reducing the of Reducing

question 118

Multiple Choice

Figure 32-2

Suppose that Figure 32-2 shows the effects of reducing the budget deficit by raising taxes. If authorities do not want real GDP to fall, monetary policy must

• A) become sufficiently more expansionary to restore the aggregate demand curve to D₀D₀.
• B) contract aggregate demand to be consistent with deficit-reducing fiscal policy.
• C) not lower interest rates and thwart the goal of a balanced budget.
• D) become more contractionary to lower the interest rate and spur investment.

---

Definitions:

Cue

A signal or stimulus that influences a person's behavior, often triggering a response based on prior knowledge or experience.

Stimulus

Something that evokes a specific functional reaction in an organ or tissue.

Semantics

The study of meaning in language, including the interpretation and relationships of words, phrases, and symbols.

Language Routines

Repeated and predictable verbal interactions that follow established patterns.