If the Economy Is at Equilibrium Below Potential Output, There

question 31

Multiple Choice

If the economy is at equilibrium below potential output, there is a(n) _____ gap, and _____ fiscal policy is appropriate.

• A) recessionary; expansionary
• B) inflationary; expansionary
• C) recessionary; contractionary
• D) inflationary; contractionary

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Definitions:

Sociometer

A hypothetical internal gauge or mechanism within individuals that monitors the level of social acceptance or rejection they feel, influencing self-esteem.

Group Membership

The state or fact of being a part of a group, which entails certain rights, responsibilities, and identities associated with being a member of that group.

Sense of Self

An individual's perception and understanding of their own identity and personality traits.

Social Identity Theory

A psychological theory proposing that a person’s sense of who they are is based on their group membership(s), which contributes to their self-esteem and behavior towards in-group and out-group members.