Use the figure below to answer the following questions.
Figure 10.3.3
-Refer to Figure 10.3.3b.You might expect the government to
A)do nothing except maintain the current equilibrium.
B)pursue trade policies that reduce exports.
C)increase government expenditure.
D)raise taxes.
E)cut government expenditure.

Question

Use the figure below to answer the following questions.
  Figure 10.3.3
-Refer to Figure 10.3.3b.You might expect the government to
A)do nothing except maintain the current equilibrium. 
B)pursue trade policies that reduce exports. 
C)increase government expenditure. 
D)raise taxes. 
E)cut government expenditure.

Quizplus · Accepted Answer

The figure shows an economy in equilibrium, with the domestic quantity supplied equaling the domestic quantity demanded. There is no market failure or inefficiency to correct, so the government would not need to take any action except to maintain the current equilibrium. Choices B, C, D, and E are unnecessary and potentially harmful interventions in this scenario.

Use the Figure Below to Answer the Following Questions