Based on the figure below. Starting from long-run equilibrium at point C, an increase in government spending that increases aggregate demand from AD to AD1 will lead to a short-run equilibrium at point ________ creating _____gap.  

An efficient point of production is

A) a point on the production possibilities curve. B) a point inside the production possibilities curve. C) the point where scarcity no longer exists. D) the point where we are currently producing.

If the economy is fully employed, then the inflationary costs of expansionary policy are likely to be: a. low, and the unemployment gains minimal. b. low, and the unemployment gains large

c. high, and the unemployment gains minimal. d. high, and the unemployment gains large.