Suppose that the economy has a recessionary gap. In order to correct this, policymakers would want to use a(n): O contractionary policy Othere is no policy capable of closing a recessionary gap expansionary policy O either expansionary or contractionary policy can be used to close a recessionary gapi

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Suppose that the economy has a recessionary gap. In order to correct this, policymakers would want to use a(n):
contractionary policy
there is no policy capable of closing a recessionary gap
expansionary policy
either expansionary or contractionary policy can be used to close a recessionary gap
Transcribed Image Text:Suppose that the economy has a recessionary gap. In order to correct this, policymakers would want to use a(n): contractionary policy there is no policy capable of closing a recessionary gap expansionary policy either expansionary or contractionary policy can be used to close a recessionary gap
Consider the following ADVAS diagram of the macroeconomy, with LRAS shown as the vertical curve, AD as the downward sloping curve and SRAS as the upward sloping curve
Place a point at the current equilibrium Then, use the segment tool to draw a new SRAS curve (parallel and of equal size to the one shown here that shows the long run self-correction that will bring this economy back to
long-run equilibrium Finally, place a point at the new long run and short
librum using the point tool
Segment
- Radi
Rest
Price Level
Real GDP (billions)
Und
Transcribed Image Text:Consider the following ADVAS diagram of the macroeconomy, with LRAS shown as the vertical curve, AD as the downward sloping curve and SRAS as the upward sloping curve Place a point at the current equilibrium Then, use the segment tool to draw a new SRAS curve (parallel and of equal size to the one shown here that shows the long run self-correction that will bring this economy back to long-run equilibrium Finally, place a point at the new long run and short librum using the point tool Segment - Radi Rest Price Level Real GDP (billions) Und
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