1. What is a recessionary gap? Explain how it can be corrected?
1. What is a recessionary gap? Explain how it can be corrected?
Homework Answers
A recessionary gap is defined as a situation when the economy is operating below full-employment level . Under this economic condition, the level of real gross domestic product (GDP) is below the level at full employment , which puts downward pressure on prices in the long run . Actual GDP is lower than potential GDP . This happens when the economy is approaching recession .
A recessionary gap can be corrected by an expansionary policy . Suppose the government adopts an expansionary fiscal policy and increases spending . This causes more money supply in the economy which causes increase in aggregate demand . The AD curve shifts right and closes the recessionary gap .
The diagram below shows the whole phenomena :
a. Define a recessionary gap. Draw the LRAS curve to show a recessionary (contractionary gap) gap....
a. Define a recessionary gap. Draw the LRAS curve to show a recessionary (contractionary gap) gap. b. Show the condition of the labor (and other resource) markets. Draw the labor market diagram next to the AS/AD diagram. c. Show and explain how a recessionary (contractionary) gap is closed using a nonintervention policy. SRAS, Price Level Ø 6 10 7 8 9 Real GDP d. e. Draw the LRAS curve to show an inflationary (expansionary) gap. What is a stabilization policy?...
Short Question 3 (10%) Explain what a recessionary gap is and what kind of policy the...
Short Question 3 (10%) Explain what a recessionary gap is and what kind of policy the government can use in order to close the gap.
What are 1) an inflationary gap and 2) a recessionary gap? What are the meanings of...
What are 1) an inflationary gap and 2) a recessionary gap? What are the meanings of inflation and deflation and how are they affected by aggregate demand and aggregate supply? Define aggregate supply and aggregate demand. What is the difference in appreciation of the dollar and inflation?
Classify each statement as relating to either a recessionary gap or an inflationary gap. Recessionary gap...
Classify each statement as relating to either a recessionary gap or an inflationary gap. Recessionary gap Inflationary gap Answer Bank Unemployment is high for an extended period of time. The overall price level has risen, on average. Equilibrium real GDP is below potential output. Equilibrium real GDP is above potential output.
What is the difference between an inflationary gap and a recessionary gap? How do they relate to GDP, income and employ...
What is the difference between an inflationary gap and a recessionary gap? How do they relate to GDP, income and employment? Discuss three items that would cause the investment demand curve to increase. Provide a real world examples of each one (not from the textbook)
1) Describe the Keynesian prescription to cure a recessionary gap. 2) Describe the Keynesian prescription to...
1) Describe the Keynesian prescription to cure a recessionary gap. 2) Describe the Keynesian prescription to cure an inflationary gap. 3) What is the difference between discretionary & automatic fiscal policy? 4) Explain the difference between zero, incomplete, & complete crowding out. If crowding out is complete, does it call into question the effectiveness of a rise in government purchases in order to remove an economy from a recessionary gap?
The economy is in a recession and the recessionary gap is large. Explain the risks of...
The economy is in a recession and the recessionary gap is large. Explain the risks of discretionary fiscal policy in this situation Discretionary fiscal policy is risky because it is hampered by all of the following lags except ______. A. recognition lag B. impact lag C. law-making lag D. business cycle lag
Starting with the graphs below identify which is the inflationary gap and which is the recessionary...
Starting with the graphs below identify which is the inflationary gap and which is the recessionary gap. Then show and explain how the equilibrium will move back to the point where actual equal potential GDP without any government action.. As AS AD o Real GOP 1 Real GDP
Q1. What is an inflationary gap? Graph and explain how this occurs and give examples of...
Q1. What is an inflationary gap? Graph and explain how this occurs and give examples of reasons why this could take place. The same for a recessionary gap. Q2. What is meant by a stronger dollar on international markets? How is that value determined? (see Giuili video for this chapter). How will this affect the AD in the US?
The Output Gap (also known as recessionary gap or GDP gap) is equal to $700 billion...
The Output Gap (also known as recessionary gap or GDP gap) is equal to $700 billion dollars. If the savings rate is 5% (MPS = 0.05) how large of a tax cut would the government have to do to raise national income enough to close the output gap?
a. Define a recessionary gap. Draw the LRAS curve to show a recessionary (contractionary gap) gap. b. Show the condition of the labor (and other resource) markets. Draw the labor market diagram next to the AS/AD diagram. c. Show and explain how a recessionary (contractionary) gap is closed using a nonintervention policy. SRAS, Price Level Ø 6 10 7 8 9 Real GDP d. e. Draw the LRAS curve to show an inflationary (expansionary) gap. What is a stabilization policy?...
Short Question 3 (10%) Explain what a recessionary gap is and what kind of policy the government can use in order to close the gap.
Classify each statement as relating to either a recessionary gap or an inflationary gap. Recessionary gap Inflationary gap Answer Bank Unemployment is high for an extended period of time. The overall price level has risen, on average. Equilibrium real GDP is below potential output. Equilibrium real GDP is above potential output.
Starting with the graphs below identify which is the inflationary gap and which is the recessionary gap. Then show and explain how the equilibrium will move back to the point where actual equal potential GDP without any government action.. As AS AD o Real GOP 1 Real GDP
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