Table 10-1
-In Table 10-1, if full employment occurs at $3,100 billion, then
A)the economy experiences a recessionary gap of $150 billion.
B)the economy experiences a recessionary gap of $300 billion.
C)the economy experiences an inflationary gap of $150 billion.
D)the economy experiences an inflationary gap of $300 billion.

Question

Table 10-1 
-In Table 10-1, if full employment occurs at $3,100 billion, then
A)the economy experiences a recessionary gap of $150 billion. 
B)the economy experiences a recessionary gap of $300 billion. 
C)the economy experiences an inflationary gap of $150 billion. 
D)the economy experiences an inflationary gap of $300 billion.

Quizplus · Accepted Answer

If full employment occurs at $3,100 billion and the economy is producing more than this level, it indicates an inflationary gap. An inflationary gap of $150 billion suggests that the actual output is $3,250 billion, which is $150 billion above the full employment level.

Table 10-1 -In Table 10-1, If Full Employment Occurs at $3,100 Billion