Use the Following to Answer Questions

Multiple Choice

Use the following to answer questions:
Figure: Short-Run Equilibrium
-(Figure: Short-Run Equilibrium) Look at the figure Short-Run Equilibrium. If the economy is at equilibrium at Y₁ and P₁, the appropriate policy to return the economy to potential output would be a(n) :

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