The Diagram Below Is for a Closed Economy Which Begins

question 35

Multiple Choice

The diagram below is for a closed economy which begins in long- run equilibrium at Y*.
FIGURE 32- 3
-Refer to Figure 32- 3. Suppose the government implements an expansionary fiscal policy which increases the budget deficit. The initial effect of this policy is the opening of a(n) gap, and a new short- run equilibrium with a price level of and real GDP of .

• A)inflationary; P₂; Y*
• B)inflationary; P₁; Y*
• C)recessionary; P₀; Y*
• D)recessionary; P₁; Y₂
• E)inflationary; P₁; Y₁

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Definitions:

Distribution

In statistics, it describes the way in which something is shared out among a group or spread over an area, particularly the way that values of a variable or dataset are spread or dispersed.

Variance

A measure of the dispersion or spread of a set of data points, calculated as the average squared deviation from the mean.

Degrees of Freedom

The number of independent pieces of information in a dataset that are available for estimating a parameter or calculating a statistic.

Student t Distribution

A probability distribution that is used in hypothesis testing for small sample sizes, when the population standard deviation is unknown.