Refer to figure 1 below. If the vertical distance labelled Z represents a deflationary gap then which of the following statements is true? Figure 1 A) Y₂ represents the full employment level of output and total expenditure must be reduced from C+I+G+(X- M)₂ to C+I+G+(X- M)₁ in order to increase output and employment. B) Y₁ represents the full employment level of output and total expenditure must be reduced from C+I+G+(X- M)₂ to C+I+G+(X- M)₁ in order to increase output and employment. C) Y₂ represents the full employment level of output and total expenditure must be increased from C+I+G+(X- M)₁ to C+I+G+(X- M)₂ in order to increase output and employment. D) Y₁ represents the full employment level of output and total expenditure must be increased from C+I+G+(X- M)₁ to C+I+G+(X- M)₂ in order to increase output and employment.

Question

Quizplus · Accepted Answer

The Answer of Refer to figure 1 below. If the vertical distance labelled Z represents a deflationary gap then which of the following statements is true? Figure 1 A) Y₂ represents the full employment level of output and total expenditure must be reduced from C+I+G+(X- M)₂ to C+I+G+(X- M)₁ in order to increase output and employment. B) Y₁ represents the full employment level of output and total expenditure must be reduced from C+I+G+(X- M)₂ to C+I+G+(X- M)₁ in order to increase output and employment. C) Y₂ represents the full employment level of output and total expenditure must be increased from C+I+G+(X- M)₁ to C+I+G+(X- M)₂ in order to increase output and employment. D) Y₁ represents the full employment level of output and total expenditure must be increased from C+I+G+(X- M)₁ to C+I+G+(X- M)₂ in order to increase output and employment.

Refer to Figure 1 Below