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If Short-Run Equilibrium Output Equals 50,000 and Potential Output (Y*)equals

Question 110

Multiple Choice

If short-run equilibrium output equals 50,000 and potential output (Y*) equals 45,000, then this economy has a(n) ________ gap that can be closed by ________.


A) expansionary; decreasing taxes
B) expansionary; increasing transfer payments
C) expansionary; decreasing government purchases
D) recessionary; increasing government purchases

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