Use the Following to Answer Questions

question 154

Multiple Choice

Use the following to answer questions:
Figure: Short- and Long-Run Equilibrium II
-(Figure: Short- and Long-Run Equilibrium II) Look at the figure Short- and Long-Run Equilibrium II. Which of the following would be the appropriate response on the part of the government upon viewing the state of the economy?

• A)Increase government spending to close the recessionary gap.
• B)Decrease government spending to close the recessionary gap.
• C)Lower tax rates to close the inflationary gap.
• D)Raise tax rates to close the inflationary gap.

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Definitions:

Information-Processing Theorists

Scholars who study how humans mentally process and store information, drawing analogies to computer processing.

Precausal Reasoning

A type of thinking observed in young children where they make causal inferences that are not based on conventional logic or a clear understanding of cause and effect.

Capacity Limitations

The boundaries or limits to the amount or type of resources, such as cognitive processing or physical space, that can be handled.

Eyewitness Testimony

Testimony given by a person who has witnessed an event, used as evidence in court.