The Figure Above Shows an Economy's Aggregate Demand Curve, Aggregate

question 4

Multiple Choice

The figure above shows an economy's aggregate demand curve, aggregate supply curve, and potential GDP.
-In the figure above, to use fiscal policy to move the economy back to potential GDP, the government must decrease government expenditure by ________ $1 trillion and/or increase taxes by ________ $1 trillion.

• A) recessionary; more than; more than
• B) inflationary; less than; more than
• C) inflationary; exactly; exactly
• D) inflationary; less than; less than
• E) recessionary; less than; less than

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Definitions:

Calcium Ions

Positively charged atoms of calcium, playing vital roles in various physiological processes, including muscle contraction and neurotransmission.

Calmodulin

A calcium-binding messenger protein present in all eukaryotic cells, involved in various cellular processes by interacting with other proteins.

Phospholipid Second Messengers

Molecules derived from phospholipids that act within cells to transmit signals from a variety of receptors to their target molecules.

Thyroid Gland

An endocrine gland that lies anterior to the trachea and releases hormones that regulate the rate of metabolism.