Use the Following to Answer Question 132

question 266

Multiple Choice

Use the following to answer question 132:
Figure: Short-Run Equilibrium
-(Figure: Short-Run Equilibrium) Look at the figure Short-Run Equilibrium. The economy is in short-run equilibrium. To move the economy to potential GDP, the government should reduce its spending by an amount equal to:

• A)(Y₁ - Y_P).
• B)(Y₁ - Y_P) / (1 - MP
• C).
• C)(Y₁ - Y_P)MPC.
• D)(Y₁ - Y_P)(1 - MP

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Definitions:

Consumer Goods

Products that are purchased for personal use or consumption by the general public, such as clothing, food, and electronics.

Farm Products

Commodities produced through agricultural activities, such as crops, livestock, and their by-products.

Fidelity Bond

A form of insurance protection that covers policyholders for losses that they incur as a result of fraudulent acts by specified individuals, typically employees.

Corporate Funds

Money or financial resources that belong to a corporation and are used for its business operations and activities.