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:

Evidence

Information or objects presented in court to persuade the judge or jury of an argument's validity.

Proof

Evidence or argument establishing a fact or the truth of a statement.

Respondeat Superior

A legal doctrine that holds employers or principals liable for the wrongful acts committed by their employees or agents while engaged in the scope of their employment or agency.

Employer

An individual or entity that hires and pays for the services of workers or employees, typically in exchange for their labor.