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Refer to the Figure Below

Question 67

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Refer to the figure below.Suppose that the economy is initially in equilibrium with output Y2 and inflation rate of 3.An increase in military spending will generate: Refer to the figure below.Suppose that the economy is initially in equilibrium with output Y<sub>2</sub> and inflation rate of <sub>3</sub>.An increase in military spending will generate: A) a recessionary gap. B) an expansionary gap. C) disinflation. D) hyperinflation.


A) a recessionary gap.
B) an expansionary gap.
C) disinflation.
D) hyperinflation.

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