When the Economy Is in a Recessionary Gap, the Government

question 78

Multiple Choice

When the economy is in a recessionary gap, the government can improve economic outcomes by:

• A) increasing taxes and aggregate spending via the multiplier.
• B) increasing the money supply, lowering the interest rate, increasing investment spending and consumption spending, and thus increasing aggregate demand.
• C) cutting government expenditure, decreasing investment spending and consumption spending, and thus increasing aggregate supply.
• D) increasing nominal wages, shifting the short run aggregate supply to the left and thus removing the recessionary gap.

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Definitions:

Cilia

Microscopic, hair-like structures on the surface of cells that move in a wave-like manner, often serving to propel substances or cells or to detect environmental stimuli.

Respiratory Tubes

Tubes that are part of the respiratory system, facilitating air movement to and from the lungs for gas exchange.

Pharynx

A muscular tube that connects the mouth and nasal passages with the esophagus and larynx, playing a key role in breathing and swallowing.

Decompression Sickness

A condition arising from dissolved gases coming out of solution into bubbles inside the body on depressurization.