Figure 14.2
-Refer to Figure 14.2. A movement from point a to point b could be caused by a(n)
A) increase in government spending.
B) decrease in the price of oil.
C) decrease in taxes.
D) decrease in short-run aggregate supply.

Question

Figure 14.2
-Refer to Figure 14.2. A movement from point a to point b could be caused by a(n)
A) increase in government spending. 
B) decrease in the price of oil. 
C) decrease in taxes. 
D) decrease in short-run aggregate supply.

Quizplus · Accepted Answer

A decrease in the price of oil would shift the short-run aggregate supply (SRAS) curve to the right, causing an increase in real GDP and a decrease in the price level. This would allow the economy to move from point a to point b. Increases in government spending or decreases in taxes would shift the aggregate demand (AD) curve to the right, causing an increase in both real GDP and the price level. A decrease in SRAS would shift both the AD and the SRAS curves to the left, causing a decrease in real GDP and an increase in the price level. Therefore, the only option that makes sense for moving from point a to point b is a decrease in the price of oil, which would shift the SRAS curve to the right.

Figure 14.2 -Refer to Figure 14.2. a Movement from Point a to a to Point