Suppose There Currently Is an Inflationary Gap

question 163

Multiple Choice

Suppose there currently is an inflationary gap. What could the government do to bring the overall price level down?

• A) nothing
• B) Increase income taxes.
• C) Increase government spending.
• D) Reduce the nation's aggregate supply.

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Definitions:

Expected Value

The weighted average of all possible values of a random variable, with the weights being the probabilities of the outcomes.

Portfolio

A blend of financial contributions, featuring stocks, bonds, market commodities, ready money, and equivalents of cash, comprising also mutual funds and ETFs.

Stocks

Shares of ownership in a corporation or financial asset, which represent a claim on the company's earnings and assets.

Investment

Allocation of resources, such as time, money, or effort, in the expectation of generating a future benefit or return.