The Figure Above Shows a Nation's Aggregate Demand Curve, Aggregate

question 36

Multiple Choice

The figure above shows a nation's aggregate demand curve, aggregate supply curve, and potential GDP.
-In the figure above, the ________ gap is one trillion dollars. To close the gap, the government can ________ government expenditure and/or ________ taxes.

• A) inflationary; increase; increase
• B) inflationary; decrease; increase
• C) recessionary; increase; decrease
• D) recessionary; decrease; increase
• E) recessionary; decrease; decrease

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Definitions:

Traceable Fixed Expense

A traceable fixed expense is a cost that can be directly linked to a specific business segment or department without influencing other areas of the business.

Net Operating Income

A measure of company profitability equal to revenue minus operating expenses, excluding taxes and interest.

Price Reduction

A decrease in the selling price of a product or service, often to increase demand or sales volume.

Traceable Fixed Expense

A fixed cost that can be directly linked to a specific segment or department within a company.