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Refer to the Graph Above

Question 25

Multiple Choice

  Refer to the graph above. Assume that the economy initially has a price level of P<sub>1</sub> and output level Q<sub>1</sub>. If the government implements expansionary fiscal policy, and the full multiplier effect was felt, it would bring the economy to: A)  P<sub>2</sub> and Q<sub>4</sub> B)  P<sub>1</sub> and Q<sub>1</sub> C)  P<sub>2</sub> and Q<sub>2</sub> D)  P<sub>1</sub> and Q<sub>3</sub> Refer to the graph above. Assume that the economy initially has a price level of P1 and output level Q1. If the government implements expansionary fiscal policy, and the full multiplier effect was felt, it would bring the economy to:


A) P2 and Q4
B) P1 and Q1
C) P2 and Q2
D) P1 and Q3

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