In Econland,the components of planned aggregate expenditure are given by:
C = 500 + 0.75(Y - T) - 500r
I = 300 - 500r
G = 400
NX = 30
If potential output equals 4,520,net taxes equal 40 and the central bank sets the interest rate at 0.05 (5%) ,then at the short-run equilibrium,there is a(n) _______ gap of _______.
A) expansionary;40
B) expansionary;80
C) recessionary;100
D) recessionary;80
E) recessionary;40
Correct Answer:
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