Question: Which factor should be shift for the graph is it the demand curve since the government is trying to expand the economy. Problem Set #3
Which factor should be shift for the graph is it the demand curve since the government is trying to expand the economy.

Problem Set #3 (Ch 13, 15-16) 24. Problem 24 Should the government use monetary and fiscal policy in an effort to stabilize the economy? The following questions address the issue of how monetary and fiscal policies affect the economy, as well as the pros and cons of using these tools to combat economic fluctuations. The following graph plots hypothetical aggregate demand (AD), short-run aggregate supply (AS), and long-run aggregate supply (LRAS) curves for the U.S. economy in February 2026. Suppose the government chooses to intervene in order to return the economy to the natural level of output by using an expansionary _ policy. Depending on which curve is affected by the government policy, shift either the AS curve or the AD curve to reflect the change that would successfully restore the natural level of output. (?) 150 O AS AD 130 AS 110 PRICE LEVEL AD 2 90 AD 70 LRAS 50 30 20 22 24 26 28 OUTPUT (Trillions of dollars) Suppose that in February 2026 the government successfully carries out the type of policy necessary to restore the natural level of output described in
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