Refer to the Graph Above

question 2

Multiple Choice

Refer to the graph above. Assume that the economy is in a recession with a price level of P₁ and output level Q₁. The government then adopts an appropriate discretionary fiscal policy. What will be the most likely new equilibrium price level and output?

• A) P₂ and Q₄
• B) P₁ and Q₁
• C) P₂ and Q₂
• D) P₁ and Q₃

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Definitions:

Workers' Compensation

Insurance providing wage replacement and medical benefits to employees injured in the course of employment.

Gross Payroll

Gross payroll represents the total amount of money a business owes to its employees before any deductions, such as taxes and other withholdings, are made.

Injury

Physical harm or damage to a person's body, often resulting from accidents or violence.

FICA-OASDI

The Social Security portion of the Federal Insurance Contributions Act tax, used to fund the Social Security program in the United States.