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

Multiple Choice

Figure 7-7
-Refer to Figure 7-7. Suppose the economy is initially in short-run equilibrium at K. Which of the following stabilization policies could be used to close the gap?

A) Decrease government welfare spending
B) Decrease personal income taxes
C) Decrease government spending on defense
D) Increase payroll taxes