Refer to Figure 16-6. In the dynamic model of AD-AS in the figure ...

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Refer to Figure 16-6. 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) contractionary fiscal policy.
  B) expansionary monetary policy.
  C) expansionary fiscal policy.
  D) expansionary automatic stabilizers.
  E) contractionary monetary policy.

Question 2

Your boss explains to you that the total fixed costs of the company are 1 million. He also informs you that each unit of production will cost twenty five cents more with each 100-unit increase.
 
  He has asked you to draw the fixed costs of the company with costs on the vertical axis and quantity of goods sold on the horizontal axis. Without drawing a graph tell your boss what the graph will look like using words. What information did your boss give you that you didn't need in order to draw the graph?

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Answer to Question 1

A

Answer to Question 2

The fixed cost graph will be a horizontal line. The costs do not change with changes in output. The information that he gave me concerning how much additional units of production would cost is irrelevant since those are variable expenses and the boss was asking me to draw the fixed cost graph as a function of output.