Starting from an Initial Equilibrium with a Recessionary Gap,what Effect

question 58

Multiple Choice

Starting from an initial equilibrium with a recessionary gap,what effect would a shift to more expansionary monetary policy tend to have?

• A)Increased prices and unemployment in the long run.
• B)Increased real output in both the long run and the short run.
• C)Increased real output in the long run but not the short run.
• D)Increased real output in the short run but not in the long run.

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Definitions:

Equilibrium

A state in an economy or market where demand equals supply, and there is no tendency for change.

Complements

Goods or services that are used together, where the increase in the demand for one leads to an increase in the demand for the other.

Substitutes

Goods or services that can replace each other in usage, providing similar utility to the consumer.

Price Increases

A rise in the cost of goods or services, which can affect demand, supply, and the overall economy.