Refer to Figure 18.2 for the following question.
Figure 18.2
-In Figure 18.2,suppose the economy in Year 1 is at point A and expected in Year 2 to be at point B.Which of the following policies could the government use to move the economy to point C?
A) Decrease income taxes
B) Decrease government purchases
C) Increase income taxes
D) Sell commonwealth government bonds and securities

Question

Refer to Figure 18.2 for the following question.
Figure 18.2 
-In Figure 18.2,suppose the economy in Year 1 is at point A and expected in Year 2 to be at point B.Which of the following policies could the government use to move the economy to point C?
A) Decrease income taxes 
B) Decrease government purchases 
C) Increase income taxes 
D) Sell commonwealth government bonds and securities

Quizplus · Accepted Answer

Decreasing income taxes would increase disposable income and aggregate demand, shifting the economy to point C.

Refer to Figure 18.2 for the Following Question