97.
Refer to the figure below. Suppose the economy is initially in equilibrium with output Y2 and inflation rate of π3. An increase in military spending will:
A.
shift AD from AD2 to AD1.
B.
shift AD from AD1 to AD2.
C.
shift AS from AS2 to AS1.
D.
shift AS from AS1 to AS2.
98.
Refer to the figure below. Suppose that the economy is initially in equilibrium with output Y2 and inflation rate of π3. An increase in military spending will generate:
A. a recessionary gap.
B. an expansionary gap.
C. disinflation.
D. hyperinflation.
99.
Refer to the figure below. Suppose the economy is in a short-run equilibrium at output Y1 and inflation rate π2. The economy is currently experiencing ______, and the correct monetary policy response to this situation, to return the economy to potential GDP, is to ______.
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
100.
Refer to the figure below. Suppose the economy is in a short-run equilibrium at output Y3 and
inflation rate π2. The economy is currently experiencing ______, and the correct monetary policy response to this situation, to return the economy to potential GDP, is to ______.
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
101.
Refer to the figure below. Suppose the economy is in a short-run equilibrium at output Y1 and
inflation rate π2. The economy is currently experiencing ______, and the correct fiscal policy response to this situation, to return the economy to potential GDP, is to ______.
A. a recessionary gap; increase government spending
B. an expansionary gap; decrease government spending
C. a recessionary gap; increase taxes
D. an expansionary gap; decrease taxes