Section 1 - Instruction

Remember, policymakers use expansionary policy (lower taxes, more spending, lower interest rates) to fight recessions and contractionary policy (higher taxes, less spending, higher interest rates) to fight inflation.

Engagement Message

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Section 2 - Practice

Type

Multiple Choice

Practice Question

The economy is experiencing an inflationary gap with unemployment well below the natural rate and rapidly rising prices. Which policy response is appropriate?

A. The central bank should lower interest rates. B. The government should increase spending on infrastructure. C. The government should increase taxes. D. The government should cut taxes for consumers.

Suggested Answers

  • A
  • B
  • C - Correct
  • D
Section 3 - Practice

Type

Sort Into Boxes

Practice Question

Sort these policy actions into the correct category.

Labels

  • First Box Label: Expansionary
  • Second Box Label: Contractionary

First Box Items

  • Tax cuts
  • Lower interest
  • Govt spending

Second Box Items

  • Higher interest
  • Govt spending cut
  • Tax increase
Section 4 - Practice

Type

Fill In The Blanks

Markdown With Blanks

The economy is in a [[blank:recessionary]] gap, with high unemployment and falling GDP. To fix this, the central bank could use expansionary monetary policy and [[blank:lower]] interest rates to encourage [[blank:investment]].

Suggested Answers

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