An economy is at a short-run equilibrium as illustrated in the above figure. An appropriate fiscal policy option to move the economy to full employment is to
A) lower the interest rate by increasing the quantity of money and move the economy to a full-employment equilibrium at point b.
B) increase government expenditure and move the economy to a full-employment equilibrium at point b.
C) increase tax rates and move the economy to a full-employment equilibrium at point c.
D) increase government expenditure and move the economy to a full-employment equilibrium at point c.
E) increase tax rates and move the economy to a full-employment equilibrium at point b.
B
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Stagflation refers to a situation in which the economy is experiencing:
A. high economic growth and high inflation. B. low economic growth and high inflation. C. high economic growth and low inflation. D. low economic growth and low inflation.
Improving the education level of the labor force will
A. shift the production possibilities curve inward. B. not shift the production possibilities curve since the total size of the labor force has not been changed. C. shift the production possibilities curve outward. D. cause a movement from a point inside the production possibilities curve to a point on the curve.