If the economy is experiencing a recessionary GDP gap from a negative demand shock, then aggregate
A. Demand must be decreased further to adjust to the new, lower natural rate of employment.
B. Supply must be decreased so that producers will have fewer goods to sell.
C. Demand must be increased so that producers can sell more goods.
D. Supply must be increased to curtail the ensuing inflation
Answer: C
You might also like to view...
Which of the following statements is FALSE?
A) The production possibilities curve shows the combinations of goods that can be consumed by a nation after trade and specialization begins. B) The production possibilities curve shows the combinations of goods that can be consumed by a nation before trade begins. C) The production possibilities curve shows the combinations of goods that can be produced by a nation after trade and specialization begins. D) The production possibilities curve shows the combinations of goods that can be produced by a nation before trading begins.
Refer to Figure 17-6. If firms and workers have adaptive expectations, an expansionary monetary policy will cause the short-run equilibrium to move from
A) point B to point C. B) point A to point C. C) point B to point A. D) point A to point B. E) point C to point B.
Everything else held constant, a decrease in holdings of excess reserves will mean
A) a decrease in the money supply. B) an increase in the money supply. C) a decrease in checkable deposits. D) an increase in discount loans.
Explain how indirect crowding out can offset expansionary fiscal policy
What will be an ideal response?