On an Aggregate Supply and Aggregate Demand Graph, If the Short-Run

question 28

Multiple Choice

On an aggregate supply and aggregate demand graph, if the short-run equilibrium is above full employment, which of the following fiscal policies could be used to move the economy to full-employment?

• A) Decrease government spending to shift the aggregate demand curve to the left.
• B) Increase government spending to shift the aggregate demand curve to the right.
• C) Increase taxes to shift the short-run aggregate supply curve to the right.
• D) Decrease taxes to shift the short-run aggregate supply curve to the left.

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Definitions:

Infant Industries

Industries in the early stages of development that may be protected from international competition to allow them to grow.

Free Trade

Free trade is a policy to eliminate restrictions on international trade, allowing goods and services to move freely across borders without tariffs, quotas, or other barriers.

Dumping

Selling a good in a foreign country at a lower price than it’s sold for in the domestic market.

Domestic Market

The market within a country's borders, referring to the trading of goods and services.