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Refer to the Figure Below

question 23

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Refer to the figure below.Suppose the economy is in a short-run equilibrium at output Y3 and inflation rate 2. The economy is currently experiencing ______, and the correct monetary policy response to this situation, to return the economy to potential GDP, is to ______. Refer to the figure below.Suppose the economy is in a short-run equilibrium at output Y<sub>3</sub> and inflation rate <sub>2.</sub> The economy is currently experiencing ______, and the correct monetary policy response to this situation, to return the economy to potential GDP, is to ______<sub>.</sub>   A) a recessionary gap; raise taxes B) an expansionary gap; cut taxes C) a recessionary gap; increase the money supply D) an expansionary gap; decrease the money supply


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