Multiple Choice
Assume that the marginal propensity to consume is 0.8 and potential output is $800 billion. If real GDP is $700 billion:
A) there is an inflationary gap.
B) there is a recessionary gap.
C) the economy is in long-run equilibrium.
D) government transfers should be decreased.
Correct Answer:
Verified
Correct Answer:
Verified
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