Suppose the Economy Is in Equilibrium with an Output Gap

question 58

Multiple Choice

Suppose the economy is in equilibrium with an output gap equal to zero and the actual inflation rate equals the expected inflation rate.If the economy experiences a negative demand shock,real GDP will become ________ potential GDP and the economy will move to the ________ along an existing Phillips curve.

• A) greater than; right
• B) greater than; left
• C) less than; right
• D) less than; left

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