Price Level Refer to the figure below. When equilibrium occurs at point a, the economy is exhibiting a(n): a) recessionary gap of ab, which calls for expansionary fiscal policy b) recessionary gap of ab, which calls for contractionary fiscal policy c) inflationary gap of ab, which calls for expansionary fiscal policy d) inflationary gap of ab, which calls for contractionary fiscal policy e) state in which there is no recessionary gap or inflationary gap J C a ✓ d -Potential AS₂ Output b AD₂ Real GDP AD₁
Price Level Refer to the figure below. When equilibrium occurs at point a, the economy is exhibiting a(n): a) recessionary gap of ab, which calls for expansionary fiscal policy b) recessionary gap of ab, which calls for contractionary fiscal policy c) inflationary gap of ab, which calls for expansionary fiscal policy d) inflationary gap of ab, which calls for contractionary fiscal policy e) state in which there is no recessionary gap or inflationary gap J C a ✓ d -Potential AS₂ Output b AD₂ Real GDP AD₁
Chapter11: Managing Aggregate Demand: Fiscal Policy
Section: Chapter Questions
Problem 1TY
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Transcribed Image Text:Price Level
Refer to the figure below. When equilibrium occurs at point a, the economy is exhibiting a(n): a) recessionary gap of ab,
which calls for expansionary fiscal policy b) recessionary gap of ab, which calls for contractionary fiscal policy c)
inflationary gap of ab, which calls for expansionary fiscal policy d) inflationary gap of ab, which calls for contractionary
fiscal policy e) state in which there is no recessionary gap or inflationary gap
J
C
a
✓ d
-Potential
AS₂ Output
b
AD₂
Real GDP
AD₁
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