If an economy is at potential GDP and an expansionary policy is correctly anticipated, the result will be:
a. a short-run fall in output and employment
b. little or no increase in GDP.
c. an increase in wages along with a dramatic fall in the price level.
d. a rapidly expanding economy.
e. a severe recession.
b
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In 2014, the price of peanuts was rising, which led peanut butter sellers and peanut butter buyers to expect the price of peanut butter would rise in the future Consequently, in the current market for peanut butter there was ________ which resulted in a ________ in the price of peanut butter and ________ in the quantity of peanut butter.
A) a decrease in supply of peanut butter and an increase in demand for peanut butter; rise; an increase, decrease or possibly no change B) a decrease in supply of peanut butter and a decrease in demand for peanut butter; rise, fall, or possibly no change; a decrease C) an increase in supply of peanut butter and a decrease in demand for peanut butter; fall; an increase, decrease or possibly no change D) a decrease in supply of peanut butter and an increase in demand for peanut butter; fall; an increase, decrease or possibly no change
Refer to Figure 16-9. Given that the economy has moved from point A to point B in the graph above, which of the following would be the appropriate fiscal policy to achieve potential GDP?
A) decrease the money supply B) increase interest rates C) increase government spending D) increase taxes