Refer to Figure 18.1 for the Following Questions

question 44

Multiple Choice

Refer to Figure 18.1 for the following questions.
Figure 18.1
-If the economy moves from A to B in Figure 18.1,which of the following would be the appropriate fiscal policy to achieve potential GDP?

• A) Increase taxes
• B) Increase government spending
• C) Contractionary fiscal policy
• D) Decrease interest rates

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Definitions:

Budget Line

An illustrated diagram detailing every possible pairing of two products affordable within a set budget at constant prices.

Horizontal Axis

In graphing, the x-axis, which is used to represent the independent variable or the baseline measure for comparison.

Vertical Axis

In a graph or chart, the y-axis that typically represents the dependent variable or the value being measured.

Entire Budget

The total amount of financial resources available or allocated for a specific purpose, project, or period.