If the full employment level of output for an economy is 1,000 units and it is currently producing 900 units, then there is _____ gap, and _____ fiscal policy can be used to close the gap.

Question

Quizplus · Accepted Answer

When an economy is producing below its full employment level of output, it is experiencing a recessionary gap. Expansionary fiscal policy, which involves increasing government spending, decreasing taxes, or both, can be used to stimulate economic activity and close this gap.

If the Full Employment Level of Output for an Economy