The Diagram Below Shows an AD/AS Model for a Hypothetical

question 114

Multiple Choice

The diagram below shows an AD/AS model for a hypothetical economy which is initially in a short-run equilibrium at point A. FIGURE 24-7 Consider Figure 24-7.At the initial short-run equilibrium,there is ________ output gap of ________.This gap could be closed by a ________.

• A)a recessionary; 100; fiscal contraction
• B)a recessionary; 200; fiscal expansion
• C)an inflationary; 100; fiscal contraction
• D)an inflationary; 200; fiscal contraction
• E)an inflationary; 350; fiscal expansion