Based on the figure below. Starting from long-run equilibrium at point C, an increase in government spending that increases aggregate demand from AD to AD1 will lead to a short-run equilibrium at point ________ creating _____gap. 
A. D; an expansionary
B. B; no output
C. B; expansionary
D. A; a recessionary
Answer: A
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A pooling equilibrium in insurance markets is inefficient because everyone buys too little insurance (relative to the efficient amount).
Answer the following statement true (T) or false (F)
A final good is one that
A) is purchased as an input in the production process. B) is purchased by its final user. C) is a natural resource used to produce a good. D) is used in the production of another good.
Suppose the federal budget deficit for the year was $500 billion and the economy was in a recession
If the economy had been at potential GDP, it is estimated that tax revenue would have been $350 billion higher and government spending on transfer payments would have been $200 billion lower. Using these estimates, the cyclically adjusted budget A) deficit was $1,050 billion. B) deficit was $650 billion. C) surplus was $50 billion. D) surplus was $650 billion.
As we move upward along a linear demand curve, the price elasticity of the demand:
A. increases. B. decreases. C. remains the same. D. increases up to the midpoint and then decreases.