Starting from a Long-Run Equilibrium, an Increase in Potential Output

question 127

Multiple Choice

Starting from a long-run equilibrium, an increase in potential output leads to ________ gap in the short run and to ________ rates 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:

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