Refer to Figure 27-6. In the dynamic model of AD-AS in the figure above, if the economy is at point A in year 1 and is expected to go to point B in year 2, Congress and the president would most likely pursue
A) expansionary automatic stabilizers.
B) contractionary monetary policy.
C) contractionary fiscal policy.
D) expansionary monetary policy.
E) expansionary fiscal policy.
Question 2
Refer to Figure 27-6. In the dynamic model of AD-AS in the figure above, if the economy is at point A in year 1 and is expected to go to point B in year 2, and no fiscal or monetary policy is pursued, then at point B
A) the economy is below full employment.
B) firms are operating at below capacity.
C) there is pressure on wages and prices to fall.
D) income and profits are falling.
E) the unemployment rate is very low.
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