Author Question: Which of the following is true of an expansionary gap? a. It develops when the expected price level ... (Read 35 times)

bucstennis@aim.com · **on:** Jun 30, 2018

Which of the following is true of an expansionary gap?
a. It develops when the expected price level exceeds the actual price level.
b. In the long run, this gap will close when resource suppliers negotiate lower resource payments.
c. It measures the amount by which actual output falls short of the economy's potential.
d. In the long run, this gap will close when the short-run aggregate supply curve shifts rightward.
e. In the long run, this gap will close when resource suppliers negotiate higher resource payments.

Question 2

If the Fed purchases U.S. government securities, gross domestic product:
a. increases because the resulting increase in the interest rate leads to a decrease in investment.
b. increases because the resulting decrease in the interest rate leads to an increase in investment.
c. decreases because the resulting increase in the interest rate leads to a decrease in investment.
d. decreases because the resulting increase in the interest rate leads to an increase in investment.
e. decreases because the resulting decrease in the interest rate leads to an increase in investment.