Refer to the information provided in Figure 27.1 below to answer the question(s) that follow. Figure 27.1
-Refer to Figure 27.1. Suppose the economy is at Point A an increase in government purchases can cause a movement to Point
A) E.
B) B.
C) C.
D) D.

Question

Refer to the information provided in Figure 27.1 below to answer the question(s) that follow.  Figure 27.1
-Refer to Figure 27.1. Suppose the economy is at Point A an increase in government purchases can cause a movement to Point
A) E. 
B) B. 
C) C. 
D) D.

Quizplus · Accepted Answer

Point B represents a combination of higher output and higher prices compared to Point A. An increase in government purchases will shift the aggregate demand curve to the right, causing an increase in both output and prices. As a result, the economy can move from Point A to Point B. However, it cannot move to Points C, D, or E, as those points represent combinations of output and prices that are not possible in the short run due to resource constraints.

Refer to the Information Provided in Figure 27