Suppose That Instead of Using Discretionary Fiscal Policy to Close

question 52

Multiple Choice

Suppose that instead of using discretionary fiscal policy to close an expansionary gap,policy makers left the economy alone.What would probably happen?

• A)depression would result
• B)the economy would be stuck in an expansionary gap
• C)the aggregate demand curve would shift,eliminating the problem
• D)the gap would close after a spurt of inflation
• E)the short-run aggregate supply curve would shift to the right