Suppose That an Economy Is in an Inflationary Gap in the Short

question 146

Multiple Choice

Suppose that an economy is in an inflationary gap in the short run. In the long run:

• A) the economy's self-correcting mechanism will restore GDP to its potential level.
• B) inflation will spiral unless the government takes dramatic fiscal measures.
• C) sustained inflation will reduce the value of money.
• D) fiscal and monetary policies may lower prices, but output will remain higher than potential level.

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Definitions:

Republican Control

Describes periods where the Republican Party has a dominant influence over political offices, whether at the federal or state level, particularly in the legislative and executive branches.

1946

The year following the end of World War II, marked by significant global post-war recovery efforts, the beginning of the Cold War, and the establishment of the United Nations.

Geopolitics

The study of how geographic factors influence political power, international relations, and strategic decision-making.