If there is currently a recessionary gap:
a. The price level will tend to rise.
b. Real output will tend to rise.
c. Both a. and b. will occur.
d. None of the above will occur.
Question 2
Suppose an economy is in equilibrium. Also suppose that consumer expectations change as the threat of war increases the likelihood of an increase in taxes. This would result in:
a. an increase in equilibrium income.
b. no change in equilibrium income.
c. a downward shift of the aggregate supply curve.
d. a decrease in equilibrium income.
e. a change in the slope of the aggregate supply curve.
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