Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; lower; potential
B. expansionary; higher; potential
C. recessionary; lower; potential
D. recessionary; lower; lower
Answer: C
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Expansionary monetary policy will decrease interest rates and decrease the velocity of money
a. True b. False Indicate whether the statement is true or false
What factors can cause the portfolio demand for money to increase?
What will be an ideal response?