Starting from a Long-Run Equilibrium, a Reduction in Potential Output

question 135

Multiple Choice

Starting from a long-run equilibrium, a reduction in potential output leads to ________ gap in the short run and to a ________ rate of inflation in the long run.

• A)an expansionary; higher
• B)an expansionary; lower
• C)a recessionary; lower
• D)a recessionary; higher

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Definitions:

Sunshine

The light and warmth that come from the sun, essential for life on Earth by providing energy that supports most ecosystems.

Thrifty Genotype

Human genotype that permits efficient storage of fat to draw on in times of food shortage and conservation of glucose and nitrogen.

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Two primary sources of energy for the body, where glucose is a simple sugar and fat is composed of fatty acids and glycerol.

Epicanthic Eye Fold

A skin fold of the upper eyelid covering the inner corner of the eye, common in East Asian and some other populations.