Home » 26) When the current short-run equilibrium is to the right of the long-run aggregate supply, appropriate discretionary fiscal policy used to address…

26) When the current short-run equilibrium is to the right of the long-run aggregate supply, appropriate discretionary fiscal policy used to address…

26) When the current short-run equilibrium is to the right of the long-run aggregate supply, appropriate discretionary fiscal policy used to address this problem would be to

A) increase taxes.

B) decrease taxes.

C) increase government spending.

D) decrease the discount rate.

27) Suppose the economy is initially operating at full employment. A reduction in the size of the budget deficit will cause which of the following in the long run?

A) a recessionary gap

B) a reduction in real GDP

C) an inflationary gap

D) none of the above

28) The long-run effect of increasing government budget deficits includes

A) a redistribution of output from privately provided goods to government provided goods.

B) no change in equilibrium real GDP.

C) an increase in the price level.

D) all of the above.

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