Refer to the above figure. Suppose that the economy was originally at point A, and then it reached point C by means of a fiscal policy action. Which of the following is correct?
A) Point C is both a short-run equilibrium and a long-run equilibrium that could have been attained through an increase in government spending.
B) Point C is a short-run equilibrium that could have been attained through a reduction in government spending, but in the long run the economy will end up at point B.
C) Point C is a short-run equilibrium that could have been attained through a tax cut, but in the long run the economy will end up at point B.
D) Point C is a long-run equilibrium that could have been attained through a tax increase, although reaching this point first required a short-run equilibrium at point B.
C
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The aggregate production function shows that an economy increases its real GDP in the short run by
A) developing new technologies. B) increasing its physical capital stock. C) using more labor. D) exploring for new deposits of natural resources.
If the government pays a per-unit subsidy to the producer of a service, we would expect to see a(n)
I. increase in the quantity demanded. II. decrease in the out-of-pocket price paid by consumers. III. increase in the quantity supplied by producers. A) I only B) both I and II only C) both II and III only D) I, II, and III