Refer to the figure below.Suppose the economy is in a short-run equilibrium at output Y3 and inflation rate 2.The economy is currently experiencing ______, and the correct fiscal policy response to this situation, to return the economy to potential GDP, is to ______. 
A) a recessionary gap; increase government spending
B) an expansionary gap; decrease government spending
C) a recessionary gap; increase taxes
D) an expansionary gap; decrease taxes
Correct Answer:
Verified
Q87: The self-correcting tendency of the economy means
Q91: Starting from long-run equilibrium, a large decrease
Q92: Refer to the figure below.Suppose the economy
Q93: Refer to the figure below.Suppose the economy
Q94: Refer to the figure below.Suppose the economy
Q95: The Great Recession was the result of:
A)two
Q96: Refer to the figure below.Long-run equilibrium in
Q98: The self-correcting property of the economy means
Q99: An economy with an expansionary gap will,
Q100: Refer to the figure below.The current level
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents