Assume That Because of a Long Policy Lag,the Fed Starts

question 164

Multiple Choice

Assume that because of a long policy lag,the Fed starts implementing expansionary monetary policy too late,i.e.,at a time when the economy is already healing itself.As a result,the economy will probably move from an initial

• A) recessionary gap to an even deeper recessionary gap.
• B) recessionary gap to an inflationary gap.
• C) inflationary gap to the natural level of Real GDP.
• D) inflationary gap to a recessionary gap.

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