If an Economy Is in an Equilibrium with an Inflationary

question 87

Multiple Choice

If an economy is in an equilibrium with an inflationary gap, policy-makers can use

• A) discretionary fiscal policy and increase government expenditure.
• B) automatic fiscal policy and increase government expenditure.
• C) automatic fiscal policy and cut taxes.
• D) discretionary fiscal policy and decrease government expenditure.
• E) discretionary fiscal policy and cut taxes.

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Definitions:

Sensory Memory

The shortest-term element of memory, which allows retention of impressions of sensory information after the original stimuli have ended.

Primacy and Recency Effects

Psychological terms describing the tendency to remember information that appears at the beginning (primacy) and end (recency) of a list better than information in the middle.

Memory

The cognitive process of encoding, storing, and retrieving information.

Retrieval

The process of accessing and bringing into conscious awareness information stored in memory.