Q7. ________ happens when the economy is producing at its potential and unemployment is at the natural rate of unemployment.

• The foreign price effect
• A recessionary gap
• Full employment GDP

Q8. On the far right side of the AS curve, the economy is producing ________ potential, and on the far left of the curve, it is producing ________ potential.

• below; above
• above; below
• at; below

Q9. If the economy is in a recession, appropriate policies to pursue may include

• a reduction in research & development spending that shifts the AS curve to the left.
• a decrease in government spending that shifts the AD curve to the right.
• an income tax cut that shifts the AD curve to the right.