Assuming Q_Fis the full employment equilibrium then a shift from AD₁ to AD₂ in Figure 11.2 will

Question

Quizplus · Accepted Answer

A shift from AD₁ to AD₂ indicates an increase in aggregate demand. This will lead to an increase in output and a reduction in the GDP gap. However, it may not completely eliminate the gap as there may still be some frictional or structural unemployment in the economy. The shift is not significant enough to cause significant inflation.

Assuming QF is the Full Employment Equilibrium Then a Shift

Assuming Q_Fis the Full Employment Equilibrium Then a Shift