Question: Using the AD - AS Model to Analyze and Predict Short - Run Fluctuations in Real GDP and the Price Level ( Single Shifts )

Using the AD-AS Model to Analyze and Predict Short-Run Fluctuations in Real GDP and the Price Level (Single Shifts)
The U.S. economy is at full employment when the following event occurs: U.S. businesses expect future profits to rise. Explain the effect of this event on RGDP and the Price Level using the AD-AS model. Will the economy experience a recessionary gap or an inflationary gap after this event?
RGDP is unchanged, and the Price Level falls. The economy will experience a recessionary gap.
RGDP falls, and the Price Level rises. The economy will experience a recessionary gap.
The effect on RGDP will be undetermined, and the Price Level falls. The economy will experience an inflationary gap.
Both Real GDP and the Price Level rise. The economy will experience an inflationary gap.
Using the AD - AS Model to Analyze and Predict

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