In the above figure, if the economy is at point A, which of the following is TRUE?
A) There is a recessionary gap.
B) There is an inflationary gap.
C) Point A is the long-run equilibrium point.
D) None of the above answers are correct.
B
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If the Fed wants to fight recession, it will ________ the federal funds rate in order to ________
A) lower; increase aggregate demand B) raise; increase aggregate supply C) lower; increase aggregate supply D) raise; decrease aggregate supply E) raise; increase aggregate demand
All of the following make the use of fiscal policy less attractive EXCEPT
A) that it cannot be effective unless it is accommodated with expansionary monetary policy. B) the substantial margin of error in the value of the multiplier. C) the legislative lag, which is the time it takes for Congress and the President to pass and implement the measure. D) the crowding out effect, which is the decrease in private spending that occurs due to increased government spending.