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Suppose a self-regulating economy is in a recessionary gap at the time the Fed enacts expansionary monetary policy. Furthermore, suppose the Fed is able to enact expansionary monetary policy in such a precise way that the economy moves from a recessionary gap into long-run equilibrium, if there are no other changes in the economy. The combination of expansionary monetary policy and a self-regulating economy will cause: __________

a. Real GDP to rise to a level above Natural Real GDP
b. Real GDP to rise to a level below Natural Real GDP
c. Real GDP to rise to a level dqual to Natural Real GDP.
d. a recessionary gap to turn into an inflationary gap.

Respuesta :

Baraq

Considering the situation described above, the combination of expansionary monetary policy and a self-regulating economy will cause "Real GDP to rise to a level equal to Natural Real GDP."

This is because when Real GDP rises to a level equal to Natural Real GDP, that means the economy has adjusted such that the economy moves from a recessionary gap into long-run equilibrium.

Generally, the Real GDP shows the actual production level of a country, and as such, when there is neither inflation nor deflation, Real GDP equals Natural Real GDP.

Hence, in this case, it is concluded that the correct answer is option C. "Real GDP to rise to a level equal to Natural Real GDP."

Learn more about Real GDP here: https://brainly.com/question/24156212

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