Refer to the above figure. Suppose that the economy was originally at

Refer to the above figure. Suppose that the economy was originally at point A, and then it reached point C by means of a fiscal policy action. Which of the following is correct?

A) Point C is both a short-run equilibrium and a long-run equilibrium that could have been attained through an increase in government spending.
B) Point C is a short-run equilibrium that could have been attained through a reduction in government spending, but in the long run the economy will end up at point B.
C) Point C is a short-run equilibrium that could have been attained through a tax cut, but in the long run the economy will end up at point B.
D) Point C is a long-run equilibrium that could have been attained through a tax increase, although reaching this point first required a short-run equilibrium at point B.

ANSWER

C