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

question 42

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

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Definitions:

Gasoline Prices

The cost per unit volume of gasoline, typically measured per liter or gallon, which fluctuates based on factors like crude oil prices, demand, and taxes.

Gross Income

The total revenue generated from a business's activities before any expenses or taxes are deducted.

Disposable Income

The sum of money families can use for expenditures and savings once income taxes are deducted.

Necessities

Fundamental needs required for sustaining human life, such as food, water, shelter, and clothing.