Respuesta :

a) aggregate expenditure is less than the real output here, Hence there exists recessionary expenditure gap exists.

Aggregate expenditure would have to increase by equal to $ 20 Billion.

Multiplier value = Change in GDP/Change in Expenditure

= 50/40

= 1.25

b) Aggregate expenditure is greater than the Real output or GDP. Inflationary expenditure Gap exists here.

Inflationary expenditure gap is $ 20 Billion.

c)

MPC = 40/50

= 0.8

MPS = 1 -0.8

= .02

multiplier = 1/MPS

= 1/0.2

= 5

What is inflationary gap?

  • An inflationary gap measures the distinction between the current level of genuine GDP and the GDP that would exist on the off chance that an economy was working at full employment.
  • For the hole to be considered inflationary, the current genuine GDP must be higher than the potential GDP.
  • Policies that can decrease an inflationary gap incorporate diminishments in government investing, charge increments, bond and securities issues, interest rate increments, and exchange installment decreases.

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