The current level of real gdp lies below potential

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International Financial Management
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Chapter 3 / Exercise 33
International Financial Management
Madura
Expert Verified
12.The current level of real GDP lies below potential GDP. An appropriate fiscal policy would be to _____, which will shift the _____ curve to the _____.A)increase government purchases; AD; left.B)increase transfer payments; AS; right.C)increase tax rates; AD; right.
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International Financial Management
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Chapter 3 / Exercise 33
International Financial Management
Madura
Expert Verified
D)increase government purchases; AD; right.
Use the following to answer questions 13-14:Figure: Short-Run Equilibrium13.(Figure: Short-Run Equilibrium) The accompanying graph shows the current short-run equilibrium in the economy. Appropriate fiscal policy action in this situation would be:
14.(Figure: Short-Run Equilibrium) The accompanying graph reflects a short run inflationary gap. Using the labeling on the graph, the size of the inflationary gap is equal to:
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Use the following to answer question 15:Figure: North-West Government15.(Figure: North-West Government) Using the accompanying figure, which of the following would be the appropriate response of the North-West government?
16.If the economy is at equilibrium below potential output:A)there is a recessionary gap, and expansionary fiscal policy is appropriate.B)there is an inflationary gap, and expansionary fiscal policy is appropriate.C)there is a recessionary gap, and contractionary fiscal policy is appropriate.D)there is an inflationary gap, and contractionary fiscal policy is appropriate.
17.Expansionary fiscal policy:
18.If the economy is at potential output, and consumption spending suddenly decreases due to a fall in consumer confidence, the appropriate fiscal policy is:
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