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Refer to the figure below Suppose the economy is in a short-run equilibrium at output Y3 and inflation rate p2 The economy is currently experiencing and the correct monetary policy response

Refer to the figure below. Suppose the economy is in a short-run equilibrium at output Y3 and inflation rate p2. The economy is currently experiencing ______, and the correct monetary policy response to this situation, to return the economy to potential GDP, is to ______. Inflation rate ASI AS2 AD AD2 Output Select one: a. a recessionary gap; raise taxes b. an expansionary gap; cut taxes c. a recessionary gap; increase the money supply d. an expansionary gap; decrease the money supply

Apr 29 2020 View more View Less

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