How Can an Inflationary Gap Be Closed

question 117

Multiple Choice

How can an inflationary gap be closed?

• A)By an increase in aggregate demand.
• B)By an increase in government spending.
• C)By an increase in the price level.
• D)By an increase in taxes.
• E)By a decrease in aggregate supply.

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Definitions:

Postdecision Dissonance

In the theory of cognitive dissonance, tension that occurs when you believe you may have made a bad decision.

Tension

A state of mental or emotional strain, stress, or conflict that can also refer to the physical stretching of an object or material.

Decision

The act or process of making choices or selecting an option from a range of possibilities, often after a period of deliberation.

Framing Effect

The tendency for people’s choices to be affected by how a choice is presented, or framed, such as whether it is worded in terms of potential losses or gains.