FIGURE 24-1 -Refer to Figure 24-1. Suppose the Economy Is Currently in Currently

Multiple Choice

FIGURE 24-1
-Refer to Figure 24-1. Suppose the economy is currently in a short-run equilibrium with output of Y0. An appropriate fiscal policy response, to attain potential output Y*) , is

A) an increase in personal income taxes.
B) a reduction in government purchases of goods and services.
C) an increase in corporate income taxes.
D) an increase in government purchases.
E) an increase in interest rates to encourage increased saving.