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:

Glucagon

A hormone produced by the pancreas that raises blood glucose levels by stimulating the liver to convert stored glycogen into glucose.

Glycogen

A multibranched polysaccharide of glucose that serves as a form of energy storage in humans, animals, fungi, and bacteria.

Blood Sugar

A measurement of the concentration of glucose present in the blood.

Thyroid Gland

A gland located in the neck that produces hormones regulating metabolism and growth.