(Figure: AD-AS) Use Figure: AD-AS. Suppose the economy is producing the output level Yp, and a negative demand shock shifts the aggregate demand curve from AD1 to AD3. The economy now has a(n) _____ gap, which can be closed by _____ fiscal policy.
A) inflationary; expansionary
B) inflationary; expansionary.
C) recessionary; contractionary
D) recessionary; contractionary.
E) recessionary; expansionary
F) recessionary; expansionary.
G) inflationary; contractionary
H) inflationary; contractionary.
Correct Answer:
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