Which of the Following Fiscal Policies Would Shift the Aggregate

question 43

Multiple Choice

Which of the following fiscal policies would shift the aggregate demand curve to the right?

• A) Taxes are decreased.
• B) Government purchases are decreased.
• C) The Federal Reserve raises the discount rate.
• D) The Federal Reserve sells bonds on the open market.

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Definitions:

Elasticity

A measure of how much the quantity demanded or supplied of a good responds to changes in prices, income, or other economic factors.

Price Elasticity

A measure of how much the quantity demanded of a good changes in response to a change in its price.

Inelastic Supply

A situation in which the supply of a good or service is not significantly affected by changes in price, characterized by a relatively steep supply curve.

Underage Drinking

The consumption of alcoholic beverages by individuals below the legal drinking age in their respective jurisdictions.