If the full employment level of output for an economy is 1,000 units and it is currently producing 1,100 units, then there is _____ gap, and the government can _____ spending to close this gap.

Question

Quizplus · Accepted Answer

Producing above the full employment level indicates an overheating economy, leading to inflationary pressures. Decreasing government spending can help cool down the economy and bring output back to the sustainable level.

If the Full Employment Level of Output for an Economy