If the economy is at equilibrium above potential output:
there is a recessionary gap, and expansionary fiscal policy is appropriate.
there is an inflationary gap, and contractionary fiscal policy is appropriate.
there is a recessionary gap, and contractionary fiscal policy is appropriate.
there is an inflationary gap, and expansionary fiscal policy is appropriate.
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Home » Business » If the economy is at equilibrium above potential output: there is a recessionary gap, and expansionary fiscal policy is appropriate. there is an inflationary gap, and contractionary fiscal policy is appropriate.