When the Economy Is in a Recessionary Gap, the Government

Multiple Choice

When the economy is in a recessionary gap, the government can improve economic outcomes by:

A) increasing taxes and aggregate spending via the multiplier.
B) increasing the money supply, lowering the interest rate, increasing investment spending and consumption spending, and thus increasing aggregate demand.
C) cutting government expenditure, decreasing investment spending and consumption spending, and thus increasing aggregate supply.
D) increasing nominal wages, shifting the short run aggregate supply to the left and thus removing the recessionary gap.