Use the Following to Answer Questions

Multiple Choice

Use the following to answer questions:
-(Figure: Short- and Long-Run Equilibrium) Refer to Figure: Short- and Long-Run Equilibrium. If the economy is at equilibrium at E₁, the appropriate policy to return the economy to potential output is a(n) :

A) increase in transfer payments.
B) decrease in transfer payments.
C) increase in taxes.
D) decrease in government spending.