Multiple Choice
Based on the diagram, if potential output equals 5,000 and the real interest rate is 1 percent, 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
Correct Answer:
Verified
Correct Answer:
Verified
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