Describe the market forces Fiat push the economy toward its potential output in
ID: 1223822 • Letter: D
Question
Describe the market forces Fiat push the economy toward its potential output in the long run recessionary Answer questions a through on the basis of(me following if the actual price level exceeds the expected price level reflected in long-term contracts, real GOP equals and the actual price level equals in the short run The situation described in part (a) resets in a(n) gap equal to c. if the actual price level is lower than the expected price level reflected m long term contracts, real GOP equals and the actual price level equals in the short run. The situation described in part (Q results in a(n) gap equal to. If the actual knee level equals the expected price level reflected in long term contracts, real GOP equals and the actual price level equals in the short tuna I The situation deserted in part (e) results in a(n) gap equal to (Long-Run adjustment) The ability of the economy to eliminate any imbalances between actual and potential output is sometimes called self-correction Using an aggregate supply and aggregate demand diagram, show why the self-correction process involves periods of inflation or deflation.Explanation / Answer
a.If the actual price level exceeds the expected price level reflected in long run contracts,real GDP equals 14.2 and the actual price level equals 130 in the short run.
b.The situation described in part(a) results in an expansionary gap equal to .2 .
Expansionary Gap – The amount by which actual output in the short run exceeds the economy’s potential output.
C.If the actual price level is lower than the expected price level reflected in long term contracts,real GDP equals 13.7 and the actual price level equals 110 in the short run.
d.The situation described in part (c) results a contractionary gap equal to .3 .
Explanation- contractionary gap-The amount by which actual output in the short run falls below the economy’s potential output.
e.If the actual price level equals the expected price level reflected in long term contracts,real GDP equals 14 and the actual price level equals 120 in the short run.
f.The situation described in part (e) results an no gap equal to 0.
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