Use the figure below to answer the following questions.

Figure 26.3.3
-Refer to Figure 26.3.3(b). You might expect the government to
A)do nothing except maintain the current equilibrium.
B)cut government expenditure.
C)increase government expenditure.
D)pursue trade policies that reduce exports.
E)raise taxes.

Question

Use the figure below to answer the following questions.
  
Figure 26.3.3
-Refer to Figure 26.3.3(b). You might expect the government to
A)do nothing except maintain the current equilibrium. 
B)cut government expenditure. 
C)increase government expenditure. 
D)pursue trade policies that reduce exports. 
E)raise taxes.

Quizplus · Accepted Answer

Based on Figure 26.3.3(b), the economy is in equilibrium with potential GDP and the natural rate of unemployment, which suggests that there is no need for active fiscal policy. Therefore, the government should do nothing except maintain the current equilibrium.

Use the Figure Below to Answer the Following Questions