Use the Figure Below to Answer the Following Question(s)

question 114

Multiple Choice

Use the figure below to answer the following question(s) . Figure 12-3
Refer to Figure 12-3. If an economy is currently operating at Y₁, which of the following would a new classical economist be most likely to favor?

• A) higher taxes and reductions in expenditures in order to shift the budget toward a surplus
• B) lower taxes and increase in expenditures in order to shift the budget toward a deficit
• C) a balanced budget
• D) no government action and reliance on the self-corrective mechanism