5. An economy is facing the recessionary gap shown in the accompanying diagram. To eliminate the gap,

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5. An economy is facing the recessionary gap shown in the accompanying diagram. To eliminate the gap, should the central bank use expansionary or contractionary monetary policy?

How will the interest rate, investment spending, consumer spending, real GDP, and the aggregate price level change as monetary policy closes the recessionary gap?

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Essentials Of Economics

ISBN: 9781429218290

2nd Edition

Authors: Paul Krugman, Robin Wells, Kathryn Graddy

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