Planned AE (PAE, trillion $) 45° AE = Y PAE₂= 7+0.5Y PAE = 5+ 0.5Y PAE = 3 +0.5Y Actual AE (GDP, Y, trillion $) Refer to a graph above. Suppose the the economy has the planned aggregate expenditure of PAE2 and the potential GDP is $10 trillion. Which of the following statements about this economy is false? O There is an inflationary output gap of $4 trillion. O In order for this economy to get back to the potential GDP, the PAE curve needs to shift to the right The economy is in an expansion. O The economy produces more than spends.
Planned AE (PAE, trillion $) 45° AE = Y PAE₂= 7+0.5Y PAE = 5+ 0.5Y PAE = 3 +0.5Y Actual AE (GDP, Y, trillion $) Refer to a graph above. Suppose the the economy has the planned aggregate expenditure of PAE2 and the potential GDP is $10 trillion. Which of the following statements about this economy is false? O There is an inflationary output gap of $4 trillion. O In order for this economy to get back to the potential GDP, the PAE curve needs to shift to the right The economy is in an expansion. O The economy produces more than spends.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
![Planned AE
(PAE, trillion
$)
45°
AE = Y
PAE₂= 7+0.5Y
PAE = 5 +0.5Y
PAE = 3 +0.5Y
Actual AE (GDP, Y,
trillion $)
Refer to a graph above. Suppose the the economy has the planned aggregate expenditure of PAE2
and the potential GDP is $10 trillion.
Which of the following statements about this economy is false?
O There is an inflationary output gap of $4 trillion.
O In order for this economy to get back to the potential GDP, the PAE curve needs to shift to the right
The economy is in an expansion.
O The economy produces more than spends.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F31e950a1-bbf4-4206-8364-b4d4ba0bb83b%2Fb5ba1b3f-aa86-446f-bd33-1b1ab2607654%2F7e5i9d_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Planned AE
(PAE, trillion
$)
45°
AE = Y
PAE₂= 7+0.5Y
PAE = 5 +0.5Y
PAE = 3 +0.5Y
Actual AE (GDP, Y,
trillion $)
Refer to a graph above. Suppose the the economy has the planned aggregate expenditure of PAE2
and the potential GDP is $10 trillion.
Which of the following statements about this economy is false?
O There is an inflationary output gap of $4 trillion.
O In order for this economy to get back to the potential GDP, the PAE curve needs to shift to the right
The economy is in an expansion.
O The economy produces more than spends.
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