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

question 26

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 24-6
-Refer to Figure 24-6.In the initial short-run equilibrium,there is ________ output gap of ________ but this gap could be closed by a ________.

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

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Definitions:

Complements

Goods or services that are used together, such that an increase in demand for one typically increases demand for the other.

Demand for Cream

The consumer interest and willingness to purchase cream, influenced by culinary trends, diet preferences, and availability of substitute products.

Demand Curve

A graph representing the relationship between the quantity of a good desired and its price.

Price

is the amount of money expected, required, or given in payment for something.