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1
Which of the following is least likely to occur?
A)A recessionary gap and a budget surplus
B)An inflationary gap and a budget surplus
C)A recessionary gap and a budget deficit
D)High employment and economic growth
2
Keynes argued that the economy could escape the great depression by:
A)Stimulating investment spending with low interest rates
B)Dramatically increasing the level of government spending
C)Encouraging consumers to spend more through an increase in taxes
D)Stimulating exports by adopting a flexible exchange rate
E)All of the above
3
Suppose that an economy is simultaneously experiencing a budget deficit and an inflationary gap. If government attempts to balance the budget, what will be the effect?
A)Real GDP will increase, and the deficit will increase.
B)Real GDP will increase, and the deficit will decrease.
C)Real GDP will decrease, and the deficit will increase.
D)Real GDP will decrease, and the deficit will decrease.





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