If Potential Output Equals 8,000 and Short-Run Equilibrium Output Equals

question 3

Multiple Choice

If potential output equals 8,000 and short-run equilibrium output equals 8,500,there is a(n) ______ gap and the Bank of Canada must _______ real interest rates in order to close the gap.

• A) recessionary;raise
• B) recessionary;lower
• C) recessionary;not change
• D) expansionary;raise
• E) expansionary;lower

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