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

question 203

Multiple Choice

Starting from a long-run equilibrium,a reduction 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) no output;higher
• D) a recessionary;higher
• E) a recessionary;lower

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Definitions:

Wind Speed

A measure of the velocity of air movement at a particular location over a specified period of time.

Directly Proportional

A relationship between two variables where their ratio is constant.

Stopping Distance

The total distance a vehicle travels from the point when the driver first perceives a need to stop, to when the vehicle comes to a complete halt.

Inversely Proportional

A relationship between two variables where their product is constant. When one variable increases, the other decreases proportionally.