Exhibit 24-1 shows the short run and long run equilibrium in an aggregate demand-aggregate supply model. If the economy is initially at point G which of the following changes will most likely be observed when a contractionary fiscal policy is adopted? a) The SRAS curve will shift to the left b) Real GDP will increase above Y2 c)The aggregate demand curve will shift from AD** to AD d)The LRAS curve will shift to the right

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Chapter11: Gross Domestic Product
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Exhibit 24-1 shows the short run and long run equilibrium in an aggregate demand-aggregate supply model. If the economy is initially at point G which of the following changes will most likely be observed when a contractionary fiscal policy is adopted?

a) The SRAS curve will shift to the left

b) Real GDP will increase above Y2

c)The aggregate demand curve will shift from AD** to AD

d)The LRAS curve will shift to the right

Exhibit 24-1
Price
P2
P1
Po
LL
LRAS
G
YO Y1 Y2
AD
AD*
SRAS
AD**
Real GDP
Transcribed Image Text:Exhibit 24-1 Price P2 P1 Po LL LRAS G YO Y1 Y2 AD AD* SRAS AD** Real GDP
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