Use the aggregate expenditures model to show how government fiscal policy could

Question

Use the aggregate expenditures model to show how government fiscal policy could eliminate either a recessionary 3 expenditure gap or an inflationary expenditure gap Given that full employment exists at $5,000, does a recessionary gap or inflationary gap exist? (Click to+ ldentify this gap in the diagram belovw Instructions: 1)Use the snap tool (Gap) to show this expenditure gap 2) This 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 Gap Full Employment 5000 C 3000- 1000 45° 0 1000 2000 3000 4000 5000 6000 7000 8000 Real GDP reset Instructions: Enter only a whole number for your answers What is the dollar amount of this expenditure gap? $

Explanation / Answer

recessionary gap exists because AD is less than required for full employment

Amount of expenditure gap is 5000-3000=2000

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