In the figure at right, if the relevant aggregate demand curve is AD2, what type of gap exists and how large is it? A. inflationary gap of $500 billion B. recessionary gap of $500 billion C. recessionary gap of $1 trillion D. inflationary gap of $1 trillion

In the figure at right, if the relevant aggregate demand curve is AD2, what type of gap exists and how large is it? A. inflationary gap of $500 billion B. recessionary gap of $500 billion C. recessionary gap of $1 trillion D. inflationary gap of $1 trillion

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter19: The Macroeconomic Perspective

Section: Chapter Questions

Problem 11RQ: What are the main components of measuring GDP with what is demanded?

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Question

In the figure at right, if the relevant aggregate demand curve is

AD2,

what type of gap exists and how large is it?

inflationary gap of $500 billion

recessionary gap of $500 billion

recessionary gap of $1 trillion

inflationary gap of $1 trillion

LRAS
SRAS
130
120
AD,
AD2
11.5 12
Real GDP per Year ($ trillions)
Price Level

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Price Level 125 120 E₁ LRAS E₂ SRAS 16 Real GDP per Year ($ trillions) AD₂ AD₁