If the Economy Is in Equilibrium with Real GDP Less

question 208

Multiple Choice

If the economy is in equilibrium with real GDP less than potential GDP,there is ________ gap and a fiscal policy that ________ is appropriate.

• A)an inflationary;increases aggregate demand
• B)an inflationary;decreases aggregate demand
• C)a recessionary;increases aggregate demand
• D)a recessionary;decreases aggregate demand
• E)a recessionary;increases potential GDP

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Definitions:

Marginal Revenue Curve

A graphical representation showing the change in total revenue with respect to changes in the quantity of goods or services sold.

Downsloping

Characterizes a line or curve on a graph that decreases in value as it moves from left to right, often used in reference to demand curves.

Pure Monopoly Firm

A market structure where a single entity exclusively controls the supply of a product or service without any close substitutes.

Inelastic Range

A portion of the demand curve where changes in price have little to no effect on the quantity demanded of a good or service.