-Refer to Figure 11.2. If the aggregate demand curve were AD₂, the economy would have a(n): A) inflationary gap that calls for fiscal policy to raise the BB function. B) recessionary gap calling for a cut in the structural budget balance (SB B). C) contractionary fiscal policy. D) recessionary gap calling for an increase in the structural budget balance (SB

Question

Quizplus · Accepted Answer

If the aggregate demand curve is at AD2, it indicates a recessionary gap, which typically calls for expansionary fiscal policy, such as cutting the structural budget balance (SBB), to stimulate the economy.