Use the following to answer questions .
Exhibit: Aggregate Demand and Aggregate Supply at Different Price Levels

-(Exhibit: Aggregate Demand and Aggregate Supply at Different Price Levels) The table shows the aggregate demand and short-run aggregate supply curves for an economy. The potential level of output is $7.6 trillion. What kind of gap, if any, exists and what is the size of the gap?
A) No gap exists because the economy is in equilibrium.
B) There is a recessionary gap of $0.8 trillion.
C) There is a recessionary gap of $0.2 trillion.
D) There is an inflationary gap of $1 trillion.

Question

Use the following to answer questions .
Exhibit: Aggregate Demand and Aggregate Supply at Different Price Levels
 
-(Exhibit: Aggregate Demand and Aggregate Supply at Different Price Levels) The table shows the aggregate demand and short-run aggregate supply curves for an economy. The potential level of output is $7.6 trillion. What kind of gap, if any, exists and what is the size of the gap?
A) No gap exists because the economy is in equilibrium. 
B) There is a recessionary gap of $0.8 trillion. 
C) There is a recessionary gap of $0.2 trillion. 
D) There is an inflationary gap of $1 trillion.

Quizplus · Accepted Answer

The intersection of aggregate demand and short-run aggregate supply curves is at a price level of 100 and a real GDP of $6.8 trillion. However, the potential level of output is $7.6 trillion. Therefore, there is a gap between the actual and potential levels of output. The size of the gap can be calculated by subtracting the potential level of output from the actual level of output which is $7.6 trillion - $6.8 trillion = $0.8 trillion. This is a recessionary gap.

Use the Following to Answer Questions