Suppose an Economy Has an Upward-Sloping Aggregate Supply Curve and a Recessionary

question 72

Multiple Choice

Suppose an economy has an upward-sloping aggregate supply curve and a recessionary GDP gap equal to $50 billion.If aggregate demand increases by a total of $50 billion,

• A)The recessionary GDP gap will be eliminated.
• B)The resulting equilibrium GDP will be lower than full employment GDP because some of the additional spending will drive up prices instead of increasing output.
• C)The resulting equilibrium GDP will be greater than full-employment GDP because of demand-pull inflation.
• D)Cyclical unemployment will increase.

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Definitions:

Catch Up Developmentally

The process in which children who have experienced delays in certain areas of development make significant progress to reach the expected level of development.

Gestational Age

The period of time measured from the first day of a woman's last menstrual period to the current date, usually used to assess the developmental progress of a fetus during pregnancy.

Low Birth Weight

A term describing infants who are born weighing less than 2,500 grams (5 pounds, 8 ounces), which can be associated with various health and developmental risks.

Gestational Age

The age of an embryo or fetus calculated from the first day of the mother's last menstrual period, often used in assessing developmental milestones and pregnancy progress.