Suppose Output Exceeds Potential Output and Contractionary Fiscal Policy Is

question 208

Multiple Choice

Suppose output exceeds potential output and contractionary fiscal policy is enacted. According to the AS/AD model, in the long run, this fiscal policy will produce:

• A)a lower output level and a lower price level than would have occurred if no action were taken.
• B)a lower price level than would otherwise have occurred if no action were taken.
• C)a lower output level than would otherwise have occurred if no action were taken.
• D)neither a lower price level nor a lower output level than would otherwise have occurred if no action were taken.

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Definitions:

Physiological Response

Automatic reactions of the body to a stimulus, such as changes in heart rate, breathing, or skin temperature.

Cognitive Evaluation

The process of making judgments, forming opinions, or assessing the value or reality of a situation or set of information based on cognitive processes.

Schachter and Singer's Experiment

a landmark psychological study conducted in 1962 focusing on the theory of emotion, particularly how cognitive factors and situational cues influence emotional experience.

Drug Effects

The physiological and psychological consequences resulting from the consumption of pharmaceuticals or substances.