In the Short Run, a Fiscal Policy Action That Results

question 119

Multiple Choice

In the short run, a fiscal policy action that results in a reduction in the size of the budget deficit will cause

• A) an increase in real GDP with stable prices if the economy was below full employment.
• B) a reduction in real GDP with falling prices if the economy was below or at full employment.
• C) an inflationary gap if the economy was initially operating at full employment.
• D) an inflationary gap if the economy was initially operating below full employment.

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Definitions:

Intended Beneficiary

A third party for whose benefit a contract is formed; an intended beneficiary can sue the promisor if such a contract is breached.

Incidental Beneficiary

A non-contracted third party who unintentionally benefits from a contract.

Intended Beneficiary

A person or entity for whom a contract is specifically designed to benefit, often having the right to enforce the contract's terms.

All Rights

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