Which of the following actions could be undertaken if the government wants to close an inflationary gap?
A. Increase taxes and reduce government spending.
B. Reduce taxes and reduce government spending.
C. Increase taxes and increase government spending.
D. Reduce taxes and increase government spending.
Answer: A
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The economy pictured in the figure below has a(n) ________ gap with a short-run equilibrium combination of inflation and output indicated by point ________. 
A. recessionary; B B. recessionary; C C. recessionary; A D. expansionary; A
Owners of proprietorships
A. must pay the corporate profits tax. B. are not subject to paying any taxes on their firms' income. C. must pay the corporate profits tax as well as report their firms' income directly on their individual income tax returns. D. report their firms' income directly on their individual income tax returns.