Scenario 1 In 2007-09, the U.S. economy went through its worst economic downturn in 30 years. As a consequence of the sharp increase in the price of housing in the U.S. in the mid-2000s, a rapid increase in the demand for oil drove up oil prices. Additionally, the collapse of the housing market, which led to Lehman Brothers' bankruptcy, generated a financial crisis that reduced private spending. Refer to scenario 1 and question 68. In February 2009, the Congress approved the American Recovery and Reinvestment Act (ARRA) put forward by President Obama, consisting of US$ 78 billion in fiscal stimulus. Starting from the equilibrium at point B, how did the ARRA affect the economy? O The fiscal stimulus reduced government expenditure, shifting the AD curve to the right. The fiscal stimulus increased government expenditure, shifting the SRAS curve to the right. O The fiscal stimulus increased government expenditure, shifting the AD curve to the right. The fiscal stimulus reduced government expenditure, shifting the SRAS curve to the right.

Scenario 1 In 2007-09, the U.S. economy went through its worst economic downturn in 30 years. As a consequence of the sharp increase in the price of housing in the U.S. in the mid-2000s, a rapid increase in the demand for oil drove up oil prices. Additionally, the collapse of the housing market, which led to Lehman Brothers' bankruptcy, generated a financial crisis that reduced private spending. Refer to scenario 1 and question 68. In February 2009, the Congress approved the American Recovery and Reinvestment Act (ARRA) put forward by President Obama, consisting of US$ 78 billion in fiscal stimulus. Starting from the equilibrium at point B, how did the ARRA affect the economy? O The fiscal stimulus reduced government expenditure, shifting the AD curve to the right. The fiscal stimulus increased government expenditure, shifting the SRAS curve to the right. O The fiscal stimulus increased government expenditure, shifting the AD curve to the right. The fiscal stimulus reduced government expenditure, shifting the SRAS curve to the right.

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter10: Aggregate Supply

Section: Chapter Questions

Problem 2.3P

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