The table below shows data for India?s economy. Real GDP is measured in millions of rupees. Suppose that full employment occurs when real GDP is 27,000 million rupees. $$\begin{array} { | l | l | l | l | }
\hline & \text { Price level } & \begin{array} { l }
\text { Real GDP } \
\text { supplied in the short } \
\text { run }
\end{array} & \text { Real GDP demanded } \
\hline \text { a } & 114 & 23,501 & 35,898 \
\hline \text { b } & 120 & 25,355 & 32,341 \
\hline \text { c } & 125 & 27,670 & 27,670 \
\hline \text { d } & 131 & 30,366 & 18,569 \
\hline \text { e } & 138 & 33,164 & 15,898 \
\hline
\end{array}$$ The economy is experiencing___________ gap and firms will ___________ .
A) a recessionary gap; increase production
B) a recessionary gap; decrease money wages paid to workers
C) an inflationary gap; increase production
D) an inflationary gap; increase money wages paid to workers

Question

The table below shows data for India?s economy. Real GDP is measured in millions of rupees. Suppose that full employment occurs when real GDP is 27,000 million rupees. $$\begin{array} { | l | l | l | l | } 
\hline & \text { Price level } & \begin{array} { l } 
\text { Real GDP } \
\text { supplied in the short } \
\text { run }
\end{array} & \text { Real GDP demanded } \
\hline \text { a } & 114 & 23,501 & 35,898 \
\hline \text { b } & 120 & 25,355 & 32,341 \
\hline \text { c } & 125 & 27,670 & 27,670 \
\hline \text { d } & 131 & 30,366 & 18,569 \
\hline \text { e } & 138 & 33,164 & 15,898 \
\hline
\end{array}$$ The economy is experiencing___________ gap and firms will ___________ .
A) a recessionary gap; increase production
B) a recessionary gap; decrease money wages paid to workers
C) an inflationary gap; increase production
D) an inflationary gap; increase money wages paid to workers

Quizplus · Accepted Answer

The economy is experiencing an inflationary gap because the real GDP supplied in the short run (27,670 million rupees) is equal to the full employment level, but the real GDP demanded is also 27,670 million rupees at the same price level. This indicates that the economy is at equilibrium at full employment. However, in the context of the options, the correct interpretation is that firms will increase money wages paid to workers to attract more labor and sustain production levels.

The Table Below Shows Data for India?s Economy The Economy Is Experiencing___________ Gap and Firms Will ___________

The Table Below Shows Data for India?s Economy The Economy Is Experiencing_ Gap and Firms Will _