Suppose the aggregate demand (AD), short-run aggregate supply (SRAS), and long-run aggregate supply (LRAS) curves in the graph represent the economy of Monaco. Answer the following two questions based on the graph. 10 LRAS 6 8 7 Aggregate price level 5 4 6 3 2 1 0 SRAS 0 1 2 3 4 5 6 7 Real GDP AD 8 6 10
Suppose the aggregate demand (AD), short-run aggregate supply (SRAS), and long-run aggregate supply (LRAS) curves in the graph represent the economy of Monaco. Answer the following two questions based on the graph. 10 LRAS 6 8 7 Aggregate price level 5 4 6 3 2 1 0 SRAS 0 1 2 3 4 5 6 7 Real GDP AD 8 6 10
Chapter9: Aggregate Demand
Section: Chapter Questions
Problem 4.9P
Related questions
Question
1. Based on the graph, Monaco is
a. experiencing a recessionary gap
b. experiencing an inflationary gap
c. experiencing a deflationary gap
d. currently at long run equilibrium
2. Which policy eliminates this phenomenon?
a. An increase in the government purchases of goods and services
b. A cut in taxes
c. An increase in government transfers
d. An increase in taxes
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