The Spending Reduction Necessary to Bring an Overheated Economy Back

question 221

Multiple Choice

The spending reduction necessary to bring an overheated economy back to full employment is called the

• A) recessionary gap.
• B) GDP gap.
• C) inflationary gap.
• D) gap analysis.

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Definitions:

Income Effect

The change in an individual's or economy's income and how that change will affect the quantity demanded of a good or service.

Money Income

The total income in the form of money received by an individual or household before taxes from all sources in a given time period.

Consumer

Consumer is an individual or group that purchases goods or services for personal use, not for manufacture or resale, driving the demand side of the marketplace.

Substitute Goods

Products or services that can be used in place of one another, fulfilling the same needs or wants of the consumer.