Suppose the Economy Is in an Inflationary Gap

question 166

Multiple Choice

Suppose the economy is in an inflationary gap. To move equilibrium aggregate output closer to the level of potential output, the best fiscal policy option is to:

• A)lower tax rates.
• B)decrease government purchases.
• C)increase the investment tax credit.
• D)lower the real interest rate.

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Definitions:

Urogenital Orifice

An anatomical term referring to the external opening through which urinary and genital systems discharge in certain animals.

Urogenital Sinus

A part of the embryonic development in mammals where the urinary and genital tracts are combined into a single channel.

Prostate Gland

A gland in the male reproductive system that produces a fluid that nourishes and transports sperm during ejaculation.

Ductus Deferens

A muscular tube in the male reproductive system that carries sperm from the epididymis to the ejaculatory duct.