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Refer to the Figure Below

Question 55

Multiple Choice

Refer to the figure below.Based on the diagram, if potential output equals 5,000 and the real interest rate is 1%, then there is ______ gap and the Fed must ______ the real interest rate so that output will equal potential output. Refer to the figure below.Based on the diagram, if potential output equals 5,000 and the real interest rate is 1%, then there is ______ gap and the Fed must ______ the real interest rate so that output will equal potential output. A) a recessionary; raise B) a recessionary; reduce C) an expansionary; reduce D) an expansionary; raise


A) a recessionary; raise
B) a recessionary; reduce
C) an expansionary; reduce
D) an expansionary; raise

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