Refer to Figure 13.3 for the Following Question

question 133

Multiple Choice

Refer to Figure 13.3 for the following question.
Figure 13.3

-Refer to Figure 13.3. Given that the economy has moved from A to B in the graph above, which of the following would be the appropriate fiscal policy to achieve potential GDP?

• A)increase interest rates
• B)increase government spending
• C)decrease interest rates
• D)increase taxes

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Definitions:

Share

A unit of ownership interest in a corporation or financial asset, representing a portion of the equity and potentially entitling the shareholder to dividends and certain rights in the company’s decisions.

Annual Payments

Annual payments refer to the total amount of money that is paid out or required to be paid each year, often related to loans, annuities, or dividends.

Borrowed

The act of obtaining or receiving funds or goods with the promise or understanding of returning or repaying the lender at a later date, usually with interest.

Interest Rate

The proportion, in a percentage, at which interest is paid by borrowers for the use of money that they borrow from a lender. It is a critical component of the credit markets.