The graph shows an economy's aggregate demand and aggregate supply curves and potential GDP. Does this economy have an inflationary gap or a recessionary gap? How does this economy return to full employment? This economy has _______ gap. It returns to full employment as _______.     A. an inflationary; the money wage rate rises   B. a recessionary; potential GDP increases   C. a recessionary; the money wage rate falls   D.

ECON MACRO
5th Edition
ISBN:9781337000529
Author:William A. McEachern
Publisher:William A. McEachern
Chapter9: Aggregate Demand
Section: Chapter Questions
Problem 4.9P
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The graph shows an economy's aggregate demand and aggregate supply curves and potential GDP.

Does this economy have an inflationary gap or a recessionary gap? How does this economy return to full employment?

This economy has _______ gap. It returns to full employment as _______.
 
 
A.
an inflationary; the money wage rate rises
 
B.
a recessionary; potential GDP increases
 
C.
a recessionary; the money wage rate falls
 
D.
an inflationary; aggregate demand decreases
Question 8
The graph shows an economy's aggregate demand and aggregate supply
curves and potential GDP.
Price level (GDP price index, 2012=100)
140- Potential GDP
130-
120-
110-
100+
90-
AS
AD
80+
16.0 17.0 18.0 19.0 20.0
Real GDP (trillions of 2012 dollars)
Does this economy have an inflationary gap or a recessionary gap? How does
this economy return to full employment?
Transcribed Image Text:Question 8 The graph shows an economy's aggregate demand and aggregate supply curves and potential GDP. Price level (GDP price index, 2012=100) 140- Potential GDP 130- 120- 110- 100+ 90- AS AD 80+ 16.0 17.0 18.0 19.0 20.0 Real GDP (trillions of 2012 dollars) Does this economy have an inflationary gap or a recessionary gap? How does this economy return to full employment?
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