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Question 42

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Use the following to answer questions: Use the following to answer questions: -(Figure: AD-AS) Refer to Figure: AD-AS. Suppose the economy is producing the output level Y<sub>p</sub> and a negative demand shock shifts the AD<sub>1</sub> curve to AD<sub>3</sub>. The economy now has a(n) _____ gap, which can be closed by _____ fiscal policy. A) inflationary; expansionary B) recessionary; contractionary C) recessionary; expansionary D) inflationary; contractionary
-(Figure: AD-AS) Refer to Figure: AD-AS. Suppose the economy is producing the output level Yp and a negative demand shock shifts the AD1 curve to AD3. The economy now has a(n) _____ gap, which can be closed by _____ fiscal policy.


A) inflationary; expansionary
B) recessionary; contractionary
C) recessionary; expansionary
D) inflationary; contractionary

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