In order to bring the economy to full employment, the government can implement expansionary fiscal policy. This would involve increasing government spending and/or reducing taxes, which would lead to an increase in aggregate demand (AD).
To reflect this policy change, you should draw a new AD line to the right of the current AD line. This new line should intersect both the short-run aggregate supply (SRAS) and long-run aggregate supply (LRAS) curves at the level of full employment.
By implementing expansionary fiscal policy, the new AD line would shift to the right, resulting in an increase in output and employment in the short run. Over time, as the economy adjusts, the SRAS curve may shift to meet the new AD line. However, the LRAS curve remains unaffected as it represents the economy's potential output at full employment. Therefore, the new AD line should intersect the LRAS curve at the same level as the previous AD line.
fiscal policy correction that will bring the economy to full employment. Currently, the LRAS is on the right of the SRAS on the AD line. Which line and where should I draw new line
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