Suppose the Economy Is Initially Experiencing a Recessionary Gap

question 89

Multiple Choice

Suppose the economy is initially experiencing a recessionary gap. A reduction in the size of the budget deficit will cause which of the following in the short run?

• A) a reduction in the size of the recessionary gap and increase in real GDP.
• B) an increase in the size of the recessionary gap and decrease in real GDP.
• C) an increase in inflation and increase in aggregate supply.
• D) an inflationary gap.

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Definitions:

Memorable Dates

Significant dates that are easily remembered due to their importance or emotional impact.

Short-term Memory

A capacity for holding a small amount of information in mind in an active, readily available state for a short period of time.

Contextual Code

The part of communication that relates to situational or environmental factors influencing interpretation and understanding.

Visual Cues

Visual signals or indicators that help organisms process information about their environment, influencing perception and behavior.