1. Below are two graphs that show an economy in disequilibrium. Fill in the table below
each graph to describe the changes that will result from either allowing the economy to
adjust on its own or having the government follow a contractionary or expansionary fiscal
policy.
Action taken Curve shift P RGDP
Allow economy to AS shifts right Fall Increase
adjust
Conduct AD shifts left Fall Fall
contractionary
fiscal policy
Action taken Curve shift P RGDP
Allow economy to AS shifts left Increase Decrease
adjust
Conduct AD shifts left Decrease Decrease
contractionary
fiscal policy
each graph to describe the changes that will result from either allowing the economy to
adjust on its own or having the government follow a contractionary or expansionary fiscal
policy.
Action taken Curve shift P RGDP
Allow economy to AS shifts right Fall Increase
adjust
Conduct AD shifts left Fall Fall
contractionary
fiscal policy
Action taken Curve shift P RGDP
Allow economy to AS shifts left Increase Decrease
adjust
Conduct AD shifts left Decrease Decrease
contractionary
fiscal policy