Suppose the Economy Is Experiencing an Inflationary Gap in the Short

question 44

Multiple Choice

Suppose the economy is experiencing an inflationary gap in the short run. The advantage of using a contractionary fiscal policy rather than allowing the economy's natural adjustment process to operate is that

• A)it will reduce the downward pressure on the price level that would otherwise occur.
• B)if private- sector expenditures increase on their own, the policy will stabilize real GDP.
• C)it will shorten what might otherwise be a long recession.
• D)it will close the output gap.
• E)it will reduce the upward pressure on the price level that would otherwise occur.

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Definitions:

Regional Land Elevation

The average height of the land surface of a specific area relative to sea level, which can influence climate, vegetation, and human settlement.

Erosion

The process by which natural forces remove soils, rocks, or dissolved material from one location on the Earth's crust, then transport it to another location.

Heating

The process of increasing the temperature of a substance or space, which can lead to changes in state, reactions or expansions.

Crust

The outermost layer of the Earth, comprising continental and oceanic crust and characterized by a composition distinct from the underlying mantle.