Refer to the Graph Above

question 56

Multiple Choice

Refer to the graph above. Assume that the economy is initially in equilibrium at the intersection of AD₁ and AS₁. Suppose that there is economic growth which shifts AS₁ to AS₂. If the application of a monetary rule is designed to shift AD₁ to AD₃, but because of pessimistic business expectations AD₁ only shifts to AD₂, then mainstream economists would suggest that the actions to be taken to avoid deflation would be to implement a(n) :

• A) Expansionary fiscal policy and a tight money policy
• B) Contractionary fiscal policy and a tight money policy
• C) Expansionary fiscal policy and an easy money policy
• D) Contractionary fiscal policy and an easy money policy

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Definitions:

Shifting Population

Refers to demographic changes within a geography over time, including movement, growth, or decline, often impacting social, economic, and infrastructure planning.

Framework

An essential supporting structure for a system, theory, or concept that provides a guideline or context for understanding relationships and conducting analysis.

Primary Motivation

The fundamental reason or driving force behind a person's actions or behavior.

Purchase Reason

Refers to the specific factors or motivations that influence a consumer's decision to buy a product or service.