If Potential Output Equals 4,000 and Short-Run Equilibrium Output Equals

Multiple Choice

If potential output equals 4,000 and short-run equilibrium output equals 3,500,there is a ______ gap and the Bank of Canada must ________ real interest rates in order to close the gap.

A) recessionary;raise
B) recessionary;lower
C) recessionary;not change
D) expansionary;raise
E) expansionary;lower