If a Shock Results in a Positive Output Gap and the Government's

question 74

Multiple Choice

If a shock results in a positive output gap and the government's policy choice is to do nothing

• A)the government will immediately implement expansionary fiscal policy.
• B)the central bank will immediately increase the money supply and close the output gap.
• C)it will be detrimental to the economy.
• D)the economy will be prevented from returning to equilibrium.
• E)the price level will fall, the interest rate will fall, and output will rise, closing the gap.

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Definitions:

Extraversion

A personality trait characterized by sociability, talkativeness, assertiveness, and a high level of energy and enthusiasm.

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A personality trait characterized by thoroughness, carefulness, and the desire to do a task well.

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Having an obligation to do something, or having control over or care for someone, as part of one's job or role.