If planned aggregate expenditure (PAE) in an economy equals 600 + 0.8Y and potential output (Y") equals 4000,then this economy has a recessionary output gap.Answer 1:a recessionary output gapPAE = 600+0.8Y. Set Y-PAE.Y- 600+0.8Y0.2Y = 600, Y 3000.Since Y- 4000, Y< Y, therefore there is a recessionary output gap.Question 4Incorrect1.5, and u3. Give your answer as aFind the unemployment rate for the same economy as above, using B =percentage, correct to 2 d.p. (hint: use Okun's law)296

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ENGR.ECONOMIC ANALYSIS

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(PAE) in an economy equals 600 + 0.8Y and potential output (Y) equals 4000, then this economy has a recessionary output gap.