The figure below shows the short-run aggregate supply curve of an economy.In this figure,an expansionary gap would be represented by the distance between:

A)Y2and Y1.
B)Y3and Y1.
C)Y2and Y3.
D)P2and P1.
E)P2and P3.

Question

The figure below shows the short-run aggregate supply curve of an economy.In this figure,an expansionary gap would be represented by the distance between:

A)Y2and Y1. 
B)Y3and Y1. 
C)Y2and Y3. 
D)P2and P1. 
E)P2and P3.

Quizplus · Accepted Answer

An expansionary gap occurs when the actual output (Y3) exceeds the potential output (Y1) and the economy is operating above its long-run equilibrium. Therefore, the distance between Y3 and Y1 represents the expansionary gap.

The Figure Below Shows the Short-Run Aggregate Supply Curve of an Economy.In