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Alena Grigore Alena Grigore
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3 years ago
The fiscal policy to counter an inflationary gap is a(n)

A)expansionary fiscal policy.

B)negative aggregate supply shock.

C)positive aggregate supply shock.

D)negative aggregate demand shock.

E)positive aggregate demand shock.
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Educator
3 years ago
The fiscal policy to counter an inflationary gap is a(n)

A)expansionary fiscal policy.

B)negative aggregate supply shock.

C)positive aggregate supply shock.

D)negative aggregate demand shock.

E)positive aggregate demand shock.

When output is below zero due to a negative aggregate demand shock, inflation falls as the economy moves downward along the short-run aggregate supply curve.

I believe it's (D), but I'm not 100% sure. What do you think?


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