Refer to the above diagram. A contractionary fiscal policy can best be represented by a:

A. shift in the aggregate demand curve from AD1 to AD2.
B. movement along the aggregate demand curve.
C. shift in the aggregate demand curve from AD1 to AD3.
D. shift in the aggregate demand curve from AD3 to AD2.


Answer: D

Economics

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When total expenditures exceed the economy's potential GDP, the proper fiscal policy is to

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Economics