If the Economy in the Graph Shown Were at Point

question 44

Multiple Choice

If the economy in the graph shown were at point B, and the government wished to bring the economy back to its long-run equilibrium, it might:

• A) increase government spending.
• B) increase income tax.
• C) decrease tax credits.
• D) All of these would move the economy to its potential GDP from point B

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Definitions:

Interest Rates

The cost of borrowing money or the return on investment for savings, usually expressed as a percentage.

Future Dollars

Money that is adjusted for its future value, accounting for inflation or interest earned over time.

Expected Rate of Return

The anticipated amount of profit or loss an investor expects to achieve on an investment.

Interest Rate

The Interest Rate is the percentage at which interest is paid by a borrower for the use of money that they borrow from a lender.