An Economy with an Expansionary Gap Will, in the Absence

question 46

Multiple Choice

An economy with an expansionary gap will, in the absence of stabilization policy, eventually experience a(n) ________ in the inflation rate, leading to a(n) ________ in output.

• A)increase; increase
• B)increase; decrease
• C)decrease; increase
• D)decrease; decrease

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Definitions:

Matching Principle

An accounting concept that expenses should be recorded in the same period as the revenues they help to generate.