following graph shows the total expenditure line (TE) for an economy where current equilibrium output is $400 billion and potential output is $275 billion. The economy is experiencing _________ (a contractionary gap, an inflationary gap) equal to $______ billion. To close the output gap, government purchases could _______ (increase, decreease) by _____ ($50, 150, 75) billion. Thus, the value of the multiplier for this economy is ___________ (1.6667, 1.4545, 0.6, 0.3125, 0.4545).
following graph shows the total expenditure line (TE) for an economy where current equilibrium output is $400 billion and potential output is $275 billion. The economy is experiencing _________ (a contractionary gap, an inflationary gap) equal to $______ billion. To close the output gap, government purchases could _______ (increase, decreease) by _____ ($50, 150, 75) billion. Thus, the value of the multiplier for this economy is ___________ (1.6667, 1.4545, 0.6, 0.3125, 0.4545).
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
The following graph shows the total expenditure line (TE) for an economy where current equilibrium output is $400 billion and potential output is $275 billion.
The economy is experiencing _________ (a contractionary gap, an inflationary gap) equal to $______ billion. To close the output gap, government purchases could _______ (increase, decreease) by _____ ($50, 150, 75) billion. Thus, the value of the multiplier for this economy is ___________ (1.6667, 1.4545, 0.6, 0.3125, 0.4545).
On the previous graph, shift the TE line to show the change in total expenditure necessary to close the output gap.
Transcribed Image Text:The following graph shows the total expenditure line (TE) for an economy where current equilibrium output is $400 billion and potential our
is $275 billion.
800
45-degree line
700
ТЕ
600
TE
500
400
300
200
100
Potential GDP
0 100
200
300
400
500
600
700
800
REAL GDP (Billions of dollars)
The economy is experiencing
equal to
billion. To close the output gap, government purchases
could
by
billion. Thus, the value of the multiplier for this economy is
On the previous graph, shift the TE line to show the change in total expenditure necessary to close the output gap.
REAL EXPENDITURE (Billions of dollars)
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