In Panel (A)of Exhibit 16-2, the Economy Is Initially in Short-Run

Multiple Choice

In Panel (a) of Exhibit 16-2, the economy is initially in short-run equilibrium at real GDP level Y₁ and price level P₂. If the government decides to intervene, it would most likely:

A) decrease taxes.
B) increase transfer payments.
C) increase the level of government spending for goods and services.
D) decrease the level of government spending for goods and services.