Starting from Potential Output, If Firms Become More Optimistic About

question 41

Multiple Choice

Starting from potential output, if firms become more optimistic about the future and decide to increase their investment in new capital, then this will shift the ______ curve to the right and generate ______.

• A) aggregate demand; a recessionary output gap
• B) aggregate supply; a recessionary output gap
• C) aggregate demand; an expansionary output gap
• D) aggregate supply; an expansionary output gap

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