Use the Following to Answer Questions

Multiple Choice

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

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