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If Potential Output Equals 3,000 and Short-Run Equilibrium Output Equals

Question 78

Multiple Choice

If potential output equals 3,000 and short-run equilibrium output equals 3,500, there is a(n) ________ gap and the Federal Reserve must ________ real interest rates in order to close the gap.


A) recessionary; raise
B) recessionary; reduce
C) recessionary; not change
D) expansionary; raise

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