Starting from Long-Run Equilibrium, a Large Increase in Government Purchases

question 95

Multiple Choice

Starting from long-run equilibrium, a large increase in government purchases will result in a(n) ______gap in the short run and ____inflation and ____output in the long run.

• A)expansionary; higher; potential
• B)expansionary; lower; potential
• C)expansionary; higher; higher
• D)recessionary; higher; lower

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Definitions:

Ice Cream

A frozen dessert made from dairy products, such as milk and cream, often combined with fruits, flavors, or other ingredients.

Frozen Yogurt

A dessert made from yogurt and sometimes other dairy products, frozen to a soft consistency, often served as a healthier alternative to ice cream.

Price

The cash amount presumed, required, or allocated in remuneration for something.

Supply Curve

The supply curve illustrates the relationship between the price of a good or service and the quantity of that good or service that a seller is willing and able to supply.