Answer: d. AD2 and then to AD3
Explanation:
The Long Run Aggregate Supply Curve represents the supply in the Economy when the Economy is at full employment. Operating at this level would be most ideal for an economy.
The point where AD and AS intersect is the quantity produced in the short run. Government policy should therefore be geared at an equilibrium level where Aggregate Demand = Aggregate Supply = Long Run Aggregate Supply because at this point, the Economy will also be at Full Employment in the Short Run which is ideal.
The Fed should therefore attempt to raise investment by enough to shift aggregate demand from AD1 to AD2 and then to AD3 because at AD3, the Aggregate Demand would intersect the AS at the Full Employment quantity which is ideal.
In the macroeconomics term, the aggregate demand is referred to as the domestic demand of the consumers at the final analysis. It can be also known as the total demand for the final goods and services in an economy at the given period of time. This is the demand that directly contributes to the computation of the Gross Domestic Product.
The correct option is d. AD2 and then to AD3
Option d. AD2 and then to AD3 is correct because the point where AD and AS intersect is the quantity produced in the short run. The government policies should therefore be geared at an equilibrium level.
Option:
a. AD4 and then to AD3
b. AD3 and then to AD4
c. AD3 and then to AD2
These options are wrong because they do not explain the correct shift or the displacement of the curve in the right direction instead they are providing the wrong direction to shift to the aggregate demand curve.
The Fed should therefore attempt to increase the investment by enough shift in the aggregate demand from AD1 to AD2 and then to AD3 because at AD3, the Aggregate Demand would be intersecting the AS at the Full Employment quantity.
To know more about the shift in the curve of aggregate demand, refer to the link below:
https://brainly.com/question/16998443
