Consider the Basic AD/AS Model, and Suppose There Is a Negative

Multiple Choice

Consider the basic AD/AS model, and suppose there is a negative output gap. If an expansionary fiscal policy is pursued and the AS curve shifts right unexpectedly, the fiscal policy may be , and real GDP may
Potential GDP.

A) too weak; stay below
B) too weak; rise above
C) too strong; stay below
D) too strong; rise above
E) appropriate; equal