Suppose the Economy Is Initially Operating at Full Employment

question 134

Multiple Choice

Suppose the economy is initially operating at full employment. A reduction in the size of the budget deficit will cause which of the following in the short run?

• A) a recessionary gap.
• B) an increase the price level and a reduction in real GDP.
• C) an increase in the price level with no change in real GDP.
• D) an increase in real GDP and an increase in the price level.

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Definitions:

Active Voice

A sentence structure where the subject performs the action of the verb directly, making the communication clearer and more direct.

Hedging Sentence

A type of statement that introduces uncertainty or lessens the impact of an assertion, often used to mitigate risk in communication.

Forecasting

The process of making predictions about future events or trends based on historical data and analysis.

Adverbs

Words that modify verbs, adjectives, or other adverbs, typically expressing manner, place, time, frequency, degree, level of certainty, etc.