Figure 8-4
-In Figure 8-4,the expansionary gap can correctly be identified as
A)the difference between 125 and 120.
B)the difference between 7 billion and 7.2 billion.
C)LRAS minus SRAS.
D)A D₁

Question

Figure 8-4 
-In Figure 8-4,the expansionary gap can correctly be identified as
A)the difference between 125 and 120. 
B)the difference between 7 billion and 7.2 billion. 
C)LRAS minus SRAS. 
D)A D₁

Quizplus · Accepted Answer

The expansionary gap is the difference between the actual output level in the economy and the potential output level when the economy is at full employment. It is represented by the difference between the current level of real GDP and the level of GDP at full employment. In this context, the difference between 7 billion and 7.2 billion represents the gap between the current economic output and the potential output, indicating an expansionary gap.

Figure 8-4 -In Figure 8-4,the Expansionary Gap Can Correctly Be Identified as Be