Exhibit 17-1 -According to Those Who Favor an Active Approach to Policy

Multiple Choice

Exhibit 17-1
-According to those who favor an active approach to policy, how can the economy shown in Exhibit 17-1 attain equilibrium at potential output?

A) The SRAS curve will shift to the left.
B) The SRAS curve will shift to the right.
C) The Fed or the government should act to shift the aggregate demand curve to the right.
D) Either the money supply or government spending should be decreased.
E) Aggregate demand should be decreased.