If aggregate demand shifts right and the President and Congress want to use fiscal policy to reverse the change in output,they could
A)increase government expenditures.If by the time policy has been implemented the economy has moved back to long-run equilibrium,then this policy will raise output above its long-run level.
B)increase government expenditures.If by the time policy has been implemented the economy has moved back to long-run equilibrium,then this policy will reduce output to below its long-run level.
C)decrease government expenditures.If by the time policy has been implemented the economy has moved back to long-run equilibrium,then this policy will raise output above its long-run level.
D)decrease government expenditures.If by the time policy has been implemented the economy has moved back to long-run equilibrium,then this policy will reduce output to below its long-run level.

Question

Quizplus · Accepted Answer

Decreasing government expenditures would shift aggregate demand left, counteracting the initial rightward shift. If the economy has returned to long-run equilibrium by the time the policy is implemented, this decrease in expenditures would reduce output below its long-run level.

If Aggregate Demand Shifts Right and the President and Congress