Refer to the information provided in Figure 11.8 below to answer the questions that follow. Figure 11.8 -Refer to Figure 11.8. For this economy to produce Y₁ and sustain it without inflation A) the price of oil must increase. B) the government must increase spending. C) the government must decrease spending. D) potential output must increase.

Question

Quizplus · Accepted Answer

In order to produce and sustain Y₁ without inflation, potential output must increase. This means that the economy must be able to produce more goods and services without increasing inflation. Increasing government spending or the price of oil could lead to inflation, while decreasing government spending could lead to decreased economic activity and potentially lower output.

Refer to the Information Provided in Figure 11