Figure 7-6 -Refer to Figure 7-6. Suppose the Economy Is Initially in Is

Multiple Choice

Figure 7-6
-Refer to Figure 7-6. Suppose the economy is initially in short-run equilibrium at B. If policy-makers decide to intervene to close the gap, which of the following can it do?

A) Decrease personal income taxes.
B) Increase government welfare spending.
C) Decrease the level of government purchases of goods and services.
D) Institute investment tax credits to encourage business investment.