Consider the Basic AD/AS Model, and Suppose There Is a Negative

question 30

Multiple Choice

Consider the basic AD/AS model, and suppose there is a negative output gap. If an expansionary fiscal policy is pursued and the AS curve shifts leftward unexpectedly, the fiscal policy may be , and real GDP may
Potential GDP.

• A) too weak; stay below
• B) too weak; rise above
• C) too strong; stay below
• D) too strong; rise above
• E) appropriate; equal

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