The economy depicted in the diagram below has ___________ output gap,which can be eliminated with ___________ fiscal or monetary policy

Question

Quizplus · Accepted Answer

The diagram shows a situation where actual output is below potential output, indicating a recessionary output gap. To eliminate this gap, expansionary policies are necessary, both fiscal and monetary. Therefore, the best choice is A, which corresponds to a recessionary output gap that can be eliminated by expansionary policies.

The Economy Depicted in the Diagram Below Has ___________ Output