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
You might also like to view...
When a central bank targets inflation, its inflation targets are usually specified as
A) a specific inflation rate target, for example, 1 percent. B) the short-term interest rate minus 2 percent. C) a point on the short-run Phillips curve. D) a range for the inflation rate. E) deviations from the inflation rate.
The fraction of capital that wears out every year is known as ________
A) gross investment B) depreciation C) net investment D) devaluation
The financial amount that a risk averse person requires to take on risk is called:
a. risk arbitrage. b. risk bonus. c. risk premium. d. risk capital. e. risk rate.
Why does inflation make nominal GDP a poor measure of the increase in total production from one year to the next?
What will be an ideal response?