The AD-AS Model in the Diagram Below Shows That,at the Initial

question 81

Multiple Choice

The AD-AS model in the diagram below shows that,at the initial short-run equilibrium point B,the economy is experiencing ___________ gap.Starting from point B,an income tax cut that shifts the aggregate demand curve from AD to AD' will lead to a new short-run equilibrium at point ___________.In this case,the tax cut,instead of eliminating the initial recessionary gap has,in fact,created ___________ gap.The tax authorities,in this case,have __________ the size of the initial output gap.

• A) a recessionary;D;an expansionary;overestimated
• B) an expansionary;D;a recessionary;underestimated
• C) a recessionary;C;a recessionary;underestimated
• D) an expansionary;C;a recessionary;overestimated
• E) a recessionary;B;an expansionary;underestimated

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