The Existence of an Inflationary Gap Implies That

question 16

Multiple Choice

The existence of an inflationary gap implies that

• A) the aggregate demand curve intersects the aggregate supply curve above potential output.
• B)fiscal policy should be used to push the aggregate demand curve to the right.
• C)equilibrium GDP is below full-employment GDP.
• D)the aggregate demand curve must be raised to promote a full-employment GDP.
• E)government spending should be raised and taxes lowered to help the economy deal with inflation.

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