Under What Conditions Will the Inflationary Impact of an Expansionary

question 16

Multiple Choice

Under what conditions will the inflationary impact of an expansionary monetary policy be the largest?

• A)When equilibrium real GDP is at potential real GDP.
• B)When there is a recessionary gap.
• C)When unemployment rates are high and there is substantial excess industrial capacity.
• D)When real GDP is falling and the price level is decreasing.

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