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Question
Refer to the above figure. Suppose the economy is operating at point A. There is a recessionary gap of , which can be closed by .
A) $3 trillion; increasing government spending by $1 trillion
B) $1 trillion; expansionary fiscal policy that shifts the short-run aggregate supply curve through point C
C) $2 trillion; expansionary fiscal policy that generates another $2 trillion in total spending
D) $2 trillion; an increase in government spending of $14 trillion
Answer
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