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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In an open economy, a shift down and to the left of the IS curve could have been caused by
A) a decline in the foreign real interest rate. B) an increase in the demand for domestic goods relative to foreign goods. C) an increase in foreign output. D) a decline in domestic output.
For substitutes, cross price elasticity of demand is:
a. Negative b. Positive c. between zero and one only d. zero.
Describe the two basic philosophies of taxation fairness
If the interest rate rises, a profit-maximizing firm will tend to
a. invest in more projects (such as new plants) with payoffs in the future. b. invest in fewer projects with payoffs in the future. c. increase both current output and future output. d. reduce both current output and future output.