-Refer to the graph in the exhibit.Which of the following would represent an expansionary gap? A) Y₂ - Y₁ B) Y₃ - Y₁ C) Y₂ - Y₃ D) Y₂ + Y₁

Question

Quizplus · Accepted Answer

An expansionary gap occurs when aggregate demand exceeds aggregate supply, leading to a higher price level and output. In the graph, Y3 - Y1 represents the expansionary gap, as it shows the difference between the actual output (Y3) and the potential output (Y1) when aggregate demand is higher than aggregate supply.

-Refer to the Graph in the Exhibit