Starting from potential output, if consumer confidence increases and consumers decide to spend more, then this will generate a(n)________ gap and inflation will ________.
A)recessionary; increase
B)recessionary; decrease
C)expansionary; decrease
D)expansionary; increase

Question

Quizplus · Accepted Answer

When consumers become more confident about the future and increase spending, the AD curve shifts rightward. This generates an expansionary gap and inflation will increase.

Starting from Potential Output, If Consumer Confidence Increases and Consumers