The diagram below shows an AD/AS model for a hypothetical economy which is initially in a short-run equilibrium at point A. Y* AS 100 80 E 60 AD 650 700 800 1000 Real GDP Refer to the figure above. In the initial short-run equilibrium, there is but this gap could be closed by a output gap of a recessionary; 200; fiscal expansion. a recessionary; 100; fiscal contraction. an inflationary; 100; fiscal contraction a recessionary; 200; fiscal contraction Price Level B.

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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The diagram below shows an AD/AS model for a hypothetical economy which is
initially in a short-run equilibrium at point A.
Y*
AS
D
100
80
E
60
AD
650
700
800
1000
Real GDP
Refer to the figure above. In the initial short-run equilibrium, there is
but this gap could be closed by a
output
gap of
a recessionary; 200; fiscal expansion.
a recessionary; 100; fiscal contraction.
an inflationary; 100; fiscal contraction
O a recessionary; 200; fiscal contraction
Price Level
Transcribed Image Text:The diagram below shows an AD/AS model for a hypothetical economy which is initially in a short-run equilibrium at point A. Y* AS D 100 80 E 60 AD 650 700 800 1000 Real GDP Refer to the figure above. In the initial short-run equilibrium, there is but this gap could be closed by a output gap of a recessionary; 200; fiscal expansion. a recessionary; 100; fiscal contraction. an inflationary; 100; fiscal contraction O a recessionary; 200; fiscal contraction Price Level
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