Question

The table gives the aggregate demand schedule, the short run aggregate supply schedule, and the long run aggregate supply schedule for an economy What is the quantity of real GDP at the short-run macroeconomic equilibrium? Price level (GDP deflator) The quantity of real GDP at the short-run macroeconomic equilibrium is s billion 100 Real GDP Real GDP Real GDP supplied supplied demanded in short run in long run (billions of 2007 dollars) 200 500 350 500 500 500 400 650 500 700 600 105 500 The economy has 115 O A. an inflationary gap of $50 billion OB. neither a recessionary gap nor an inflationary gap OC. a recessionary gap of $50 billion O D. an inflationary gap of $500 billion

Answer 1

Real GDP demanded is equal to real GDP supplied in short run at $500 billion.

At this level of GDP, the long run aggregate supply is equal to the aggregate demand. Hence, there is no recessionary/inflationary gap. b is correct.