When the macroeconomic equilibrium is such that real GDP exceeds potential real GDP, the economy is suffering from ________, and the government policy to eliminate this gap will ________ real GDP and ________ the price level.
A) an inflationary gap; increase; increase
B) a recessionary gap; decrease; decrease
C) an inflationary gap; increase; decrease
D) a recessionary gap; increase; decrease
E) an inflationary gap; decrease; decrease
Question 2
Which of the following is true of protectionism?
A) It lowers prices for domestic consumers and increases social surplus.
B) It increases prices for domestic consumers and also increases social surplus.
C) It increases prices for domestic consumers and lowers social surplus.
D) It lowers prices for domestic consumers and also reduces social surplus.
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