Refer to the above figure. Suppose the U.S. economy is currently operating at point C. Which of the following actions would you recommend to the president of the United States?
A) Engage in contractionary fiscal policy by reducing government spending.
B) Reduce taxes to stimulate investment, consumption and net exports.
C) Increase government spending while holding taxes constant.
D) Reduce the interest rate to stimulate investment minimizing the crowding out effect.
Question 2
Which of the following factors will NOT cause a shift in the demand for a good?
A) A change in consumer incomes B) A change in the market price of the good
C) A change in the number of consumers D) A change in tastes and preferences
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