Refer to the Following Figure to Answer the Questions That

question 160

Multiple Choice

Refer to the following figure to answer the questions that follow.

-Which of the following would be the theoretical outcome of expansionary fiscal policy in the following aggregate demand-aggregate supply model?

• A) The aggregate demand (A
• D) curve would shift from AD₁ to AD₂.
• B) The short-run aggregate supply (SRA
• S) curve would shift from SRAS2 to SRAS1.
• C) The SRAS curve would shift from SRAS1 to SRAS2.
• D) The AD curve would shift from AD₁ to AD₂ at the same time that the SRAS curve would shift from SRAS1 to SRAS2.
• E) The AD curve would shift from AD₂ to AD₁.

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Definitions:

Marginal Cost

Expenses related to the production of an additional unit of any good or service.

Short-Run Supply

A graphical representation that shows the quantity of goods that suppliers are willing and able to produce and sell at different prices in the short-term, with some inputs fixed.

Short Run

A time period in economics where at least one factor of production is fixed, limiting the immediate response to changes in demand or supply.

AVC

Average Variable Cost, the total variable cost divided by the quantity of output, representing the variable cost per unit of output.