If There Is an Inflationary Gap in the Economy, Discretionary

question 38

Multiple Choice

If there is an inflationary gap in the economy, discretionary fiscal policy will likely include action to:

• A) shift aggregate demand to the right.
• B) prevent the aggregate demand curve from shifting.
• C) shift aggregate demand to the left.
• D) shift both aggregate demand and short-run aggregate supply to the left.

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Definitions:

Standard Deviation

A statistic that measures the dispersion or variability of a dataset relative to its mean, used to quantify the amount of variation or dispersion of a set of values.

Aggregate Income

The total income earned by all factors of production in an economy, including wages, rents, interest, and profits.

Aggregate Consumption

The total amount of goods and services consumed in an economy, often used to analyze economic health and growth.

Consumption Function

A concept in economics that calculates the expected total consumption of goods and services by individuals at different income levels.