-The table above gives data for the nation of Pearl,a small island in the South Pacific.If aggregate demand increases so that the quantity of real GDP demanded is $6 billion more at each price level,the new equilibrium real GDP is ________,and the nation is now experiencing a(n)________.
A)$22 billion;inflationary gap
B)$22 billion;recessionary gap
C)$28 billion;inflationary gap
D)$28 billion;recessionary gap
E)$25 billion;equilibrium

Question

-The table above gives data for the nation of Pearl,a small island in the South Pacific.If aggregate demand increases so that the quantity of real GDP demanded is $6 billion more at each price level,the new equilibrium real GDP is ________,and the nation is now experiencing a(n)________.
A)$22 billion;inflationary gap 
B)$22 billion;recessionary gap 
C)$28 billion;inflationary gap 
D)$28 billion;recessionary gap 
E)$25 billion;equilibrium

Quizplus · Accepted Answer

The increase in aggregate demand shifts the demand curve to the right, leading to a new equilibrium real GDP of $28 billion, which creates an inflationary gap as the economy is producing beyond its potential output.

-The Table Above Gives Data for the Nation of Pearl,a