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Suppose an Economy Is Operating with an Inflationary Gap

Question 39

Multiple Choice

Suppose an economy is operating with an inflationary gap. In this case, policymakers would
Seek to move the economy


A) back down the Phillips curve, trading a reduction in unemployment for an increase in inflation.
B) up the Phillips curve, trading a reduction in unemployment for an increase in inflation.
C) back down the Phillips curve, trading a reduction in inflation for an increase in unemployment.
D) up the Phillips curve, trading a reduction in inflation for an increase in unemployment.

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