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Suppose the Economy Is in Equilibrium with an Output Gap

Question 73

Multiple Choice

Suppose the economy is in equilibrium with an output gap equal to zero and the actual inflation rate equals the expected inflation rate.If the economy experiences a positive demand shock,real GDP will become ________ potential GDP and the economy will move to the ________ along an existing Phillips curve.


A) greater than; right
B) greater than; left
C) less than; right
D) less than; left

Correct Answer:

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