Question 8
1 pts
Suppose an economy exhibits a large unexpected increase in productivity growth that lasts for a decade; however, monetary policymakers are slow to recognize that the change is to potential—not current—output, and they interpret the increase in output as a boom that leads current to exceed potential output.
In this scenario, policy makers believe that ______ pressures are building and incorrectly respond by ______ interest rates, which sends the economy into a(n) ______ gap.
inflationary; raising; recessionary
inflationary; reducing; recessionary
recessionary; raising; expansionary
recessionary; reducing; recessionary
Not enough information is given.