📚 Learning Guide
Understanding Recessionary Gaps
hard

Arrange the following steps in order to address a recessionary gap in Zeta's economy: A) Implement fiscal policies to stimulate demand, B) Identify the current unemployment rate, C) Assess the potential output using the production possibilities curve, D) Monitor the effectiveness of the policies over time.

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Choose the Best Answer

A

B → C → A → D

B

C → A → D → B

C

A → B → D → C

D

B → A → D → C

Understanding the Answer

Let's break down why this is correct

Answer

To address a recessionary gap in Zeta's economy, the first step is to identify the current unemployment rate. This helps to understand how many people are out of work and gives a clear picture of the economic situation. Next, we assess the potential output using the production possibilities curve, which shows how much the economy can produce if all resources are used efficiently. After understanding these factors, we can implement fiscal policies to stimulate demand, such as increasing government spending or cutting taxes to encourage spending. Finally, it is important to monitor the effectiveness of these policies over time to see if they are helping to reduce unemployment and boost the economy.

Detailed Explanation

First, we need to know the unemployment rate to understand how bad the recession is. Other options are incorrect because This option starts with assessing potential output before knowing the unemployment rate; This option suggests implementing policies before assessing potential output.

Key Concepts

Recessionary Gaps
Production Possibilities Curve
Fiscal Policy
Topic

Understanding Recessionary Gaps

Difficulty

hard level question

Cognitive Level

understand

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