If Real Equilibrium GDP Is Below the Long-Run Aggregate Supply

question 77

Multiple Choice

If real equilibrium GDP is below the long-run aggregate supply curve, an appropriate fiscal policy would be to:

• A)increase government purchases and increase a budget deficit.
• B)pursue a contractionary fiscal policy by increasing the budget surplus.
• C)increase individual income taxes to balance the budget.
• D)increase business income taxes to increase tax fairness.

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Definitions:

Urinary Bladder

A hollow muscular organ in humans and some other animals that collects and stores urine from the kidneys before disposal by urination.

Parasympathetic Axons

Nerve fibers that are part of the parasympathetic nervous system, responsible for transmitting impulses to organs and glands to support rest and digest functions.

Facial Nerve

The facial nerve, also known as cranial nerve VII, is responsible for controlling the muscles of facial expression, taste sensations from the anterior two-thirds of the tongue, and other functions.

Adrenergic Receptors

Proteins located on cell surfaces that mediate responses to epinephrine and norepinephrine, involved in the fight-or-flight response.