Economics Today: The Macro View (19th Edition) (Pearson Series in Economics)
Economics Today: The Macro View (19th Edition) (Pearson Series in Economics)
19th Edition
ISBN: 9780134478760
Author: Roger LeRoy Miller
Publisher: PEARSON
Question
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Chapter 13, Problem 10P
To determine

  1. The gap that exists at point A
  2. The change in government spending that could eliminate the gap at point A

Concept introduction:

Aggregate Supply (AS): AS is the total dollar value of goods and services produced by an economy during a given period of time.

Aggregate Demand (AD): AD is the total dollar value of goods and services demanded in an economy during a given period of time.

Real Gross Domestic Product (Real GDP): Real GDP is the total dollar value of all final goods and services produced in an economy during a given period of time, measured at base-year prices.

Inflationary gap: Inflationary gap is the excess of actual aggregate supply over potential aggregate supply. It arises when AD exceeds full-employment AS.

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