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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Definitions:

Good Things

Positive aspects, events, or outcomes that contribute to well-being and happiness.

Optimist

An individual who tends to maintain a positive outlook and expects good outcomes even in the face of adversity.

Pessimist

An individual who tends to see the worst aspect of things or believe that the worst will happen; a negative outlook on life.

Learned Helplessness

A condition in which a person suffers from a sense of powerlessness, arising from a traumatic event or persistent failure to succeed, characterized by low motivation and depression.