Figure: Aggregate Demand Shifts Refer to the Figure

question 236

Multiple Choice

Figure: Aggregate Demand Shifts Refer to the figure.Suppose the economy is initially at point A in the diagram.If an increase in investment spending causes a shift of the AD curve from AD₁ to AD₄,then the government can avoid a short-run increase in inflation by:

• A) increasing taxes so that the AD curve shifts back to AD₁.
• B) increasing taxes so that the AD curve shifts further out to AD₅.
• C) increasing government spending so that the AD curve shifts back to AD₁.
• D) increasing government spending so that the AD curve shifts further out to AD₅.

---

Definitions:

Price-Based Competition

A competitive strategy focusing on setting prices lower than competitors to attract price-sensitive customers.

Product Life Cycle

The stages a product goes through from its introduction into the market through its growth, maturity, and eventual decline.

Product Life Cycle

The product life cycle is the progression of a product through different stages from introduction to growth, maturity, and decline.

Marketers

Professionals or companies involved in promoting, selling, and distributing a product or service to consumers.