**Using the Aggregate Expenditures Model**To understand how government fiscal policy can eliminate a recessionary expenditure gap or an inflationary expenditure gap, consider the following graph and questions:### Graph Explanation:- **Axes**: The x-axis represents Real GDP in billions of dollars, ranging from 0 to 6000. The y-axis represents Aggregate Expenditures (also in billions of dollars), from 0 to 6000.- **Lines**: - **AE₀ (Aggregate Expenditures Line)**: The blue line that represents the aggregate expenditures at various levels of real GDP. - **45° Line**: The grey line representing points where aggregate expenditures equal real GDP (Y = AE). - **Full Employment**: Indicated by a dashed vertical line at $4500 billion on the x-axis.### Questions:#### a. Gap Existence:- Determine whether a recessionary or inflationary gap exists, given that full employment is at $4500 billion.#### b. Identifying the Gap:- **Instructions**: Use the provided "Gap" tool to illustrate the expenditure gap. The tool shows a two-ended arrow; adjust it to cover the range of the expenditure gap.#### c. Calculating the Gap:- Determine the dollar amount of the expenditure gap.Enter your results in the interactive fields provided.

Full employment level refers to the total output produced by the economy with the given amount of…

Using the aggregate expenditures model, answer the questions below to show how government fiscal policy could eliminate either a recessionary expenditure gap or an inflationary expenditure gap. Full employment 6000 Tools 5 5000 Gap 54000 3000 2000 1000 45° 1000 2000 3000 4000 5000 6000 Real GDP (billions of dollars) a. Given that full employment exists at $4,500 billion, does a recessionary gap or an inflationary gap exist? (Click to select) b. Identify this gap using the diagram above. Instructions: (1) Use the tool provided 'Gap' to show this expenditure gap. The tool will display a two- ended arrow. Drag one end of the arrow to the lowest value of the expenditure gap and drag the other end to the highest value of the gap. c. What is the dollar amount of the expenditure gap? billion Aggregate expenditures (billions of dollars)

Using the aggregate expenditures model, answer the questions below to show how government fiscal policy could eliminate either a recessionary expenditure gap or an inflationary expenditure gap. Full employment 6000 Tools 5 5000 Gap 54000 3000 2000 1000 45° 1000 2000 3000 4000 5000 6000 Real GDP (billions of dollars) a. Given that full employment exists at $4,500 billion, does a recessionary gap or an inflationary gap exist? (Click to select) b. Identify this gap using the diagram above. Instructions: (1) Use the tool provided 'Gap' to show this expenditure gap. The tool will display a two- ended arrow. Drag one end of the arrow to the lowest value of the expenditure gap and drag the other end to the highest value of the gap. c. What is the dollar amount of the expenditure gap? billion Aggregate expenditures (billions of dollars)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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