Refer to the diagram, in which Qf is the full-employment output. if the economy's current aggregate demand curve is AD3, it would be appropriate for the government to: 

  

A.) Reduce government expenditures and taxes by equal size amounts.
B.) Reduce government expenditures or increase taxes.
C.) Increase government expenditures or reduce taxes.
D.) Reduce unemployment compensation benefits.

Transcribed Image Text:

AD, AS AD2 AD, AD, Q, Real GDP Price Level AD, AS AD2 AD, AD, Q, Real GDP Price Level

Answer rating: 100% (QA)

B Reduce government expenditures or incr... View the full answer