(Scenario: Fiscal Policy)Refer to Scenario: Fiscal Policy

question 225

Multiple Choice

(Scenario: Fiscal Policy) Refer to Scenario: Fiscal Policy.If actual output is 500 billion arcs,to restore the economy to potential output the government should _____ by 25 billion arcs.

• A) increase taxes
• B) decrease taxes
• C) increase spending
• D) decrease spending

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Definitions:

Demand Curve

A graph showing the relationship between the price of a good and the quantity demanded by consumers, typically downward sloping.

Determinant of Demand

Factors that influence the demand for a good or service, including price, consumer preferences, income levels, and prices of related goods.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a given price point, at a specific time.

Quantity Supplied

Represents the amount of goods or services that producers are willing and able to sell at a given price.