The figure below shows the determination of the equilibrium price level and real GDP in an aggregate demand-aggregate supply model.If the economy is at point H,there is a(n):
Figure 10.7

A)expansionary gap of $300 billion.
B)recessionary gap of $300 billion.
C)recessionary gap of $10 billion.
D)expansionary gap of $20 billion.
E)expansionary gap of $10 billion.

Question

The figure below shows the determination of the equilibrium price level and real GDP in an aggregate demand-aggregate supply model.If the economy is at point H,there is a(n):​ ​
Figure 10.7

A)expansionary gap of $300 billion. 
B)recessionary gap of $300 billion. 
C)recessionary gap of $10 billion. 
D)expansionary gap of $20 billion. 
E)expansionary gap of $10 billion.

Quizplus · Accepted Answer

Point H is to the left of the potential GDP (Yp) line, which means that the actual output is below the potential output, indicating a recessionary gap. The distance between the actual output and the potential output is $300 billion.

The Figure Below Shows the Determination of the Equilibrium Price