The table below shows data for five economies of similar size. Real GDP is measured in billions of dollars. Assume that potential output for each economy is $340 billion. TABLE 24-1
-Suppose that the economy is initially in a long-run macroeconomic equilibrium. A shock then hits the economy and we observe that the unemployment rate increases and the price level decreases. We can conclude that
Has decreased and there is now an) gap.
A) aggregate supply; inflationary
B) aggregate demand; recessionary
C) aggregate supply; recessionary
D) aggregate demand; inflationary

Question

The table below shows data for five economies of similar size. Real GDP is measured in billions of dollars. Assume that potential output for each economy is $340 billion.  TABLE 24-1
-Suppose that the economy is initially in a long-run macroeconomic equilibrium. A shock then hits the economy and we observe that the unemployment rate increases and the price level decreases. We can conclude that
Has decreased and there is now an) gap.
A) aggregate supply; inflationary 
B) aggregate demand; recessionary 
C) aggregate supply; recessionary 
D) aggregate demand; inflationary

Quizplus · Accepted Answer

A decrease in aggregate demand leads to lower price levels and higher unemployment, indicating a recessionary gap.

The Table Below Shows Data for Five Economies of Similar