how-does-contractionary-fiscal-policy-affect-the-ad-as-model-to-return-the-econo

Question

How does contractionary fiscal policy affect the AD-AS model to return the economy to long-run equilibrium?

Accepted Answer

It shifts aggregate demand to the left, decreasing price levels.

Answer

It shifts aggregate demand to the right, stabilizing price levels.

Answer

It keeps aggregate demand unchanged, stabilizing price levels.

Answer

It shifts aggregate demand to the right, increasing price levels.