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The Economy Is in a Recessionary Gap,wages Are Inflexible Downward,and

Question 116

Multiple Choice

The economy is in a recessionary gap,wages are inflexible downward,and there is complete crowding out.Which of the following is consistent with this state of affairs?


A) The economy will soon self-regulate and produce Natural Real GDP.
B) Expansionary fiscal policy will be effective at removing the economy from the recessionary gap.
C) If expansionary fiscal policy is implemented,the AD curve will shift to the right,and eventually the price level and Real GDP will rise.
D) b and c
E) none of the above

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