Figure: Aggregate Demand and Fiscal Policy Refer to the figure. Assume the government of an economy in recession at point Y in the diagram is aware of the expenditure multiplier when it formulates policy decisions. If it chooses to increase government spending growth by 4percentage points, it should expect the economy to:
A) move at least to point W.
B) move at least to point X.
C) move at least to point Z.
D) stay at point Y.

Question

Figure: Aggregate Demand and Fiscal Policy  Refer to the figure. Assume the government of an economy in recession at point Y in the diagram is aware of the expenditure multiplier when it formulates policy decisions. If it chooses to increase government spending growth by 4percentage points, it should expect the economy to:
A) move at least to point W. 
B) move at least to point X. 
C) move at least to point Z. 
D) stay at point Y.

Quizplus · Accepted Answer

The Answer of Figure: Aggregate Demand and Fiscal Policy  Refer to the figure. Assume the government of an economy in recession at point Y in the diagram is aware of the expenditure multiplier when it formulates policy decisions. If it chooses to increase government spending growth by 4percentage points, it should expect the economy to:
A) move at least to point W. 
B) move at least to point X. 
C) move at least to point Z. 
D) stay at point Y.

Figure: Aggregate Demand and Fiscal Policy Refer to the Figure