To eliminate a recessionary gap, the expenditure schedule should be

Question

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A recessionary gap occurs when aggregate demand is less than potential output, leading to unemployment and idle resources. To eliminate this gap, we need to increase aggregate demand, which can be achieved by shifting the expenditure schedule upward. This can be done by increasing government spending, reducing taxes, or increasing transfer payments. By doing so, we increase overall demand in the economy and close the gap between actual and potential output. Shifting the expenditure schedule downward would only worsen the recessionary gap by decreasing total spending and making it even harder for the economy to recover. Making the expenditure schedule steeper or flatter wouldn't directly impact the recessionary gap as these only refer to the steepness of the line connecting points on the graph of planned expenditures.

To Eliminate a Recessionary Gap, the Expenditure Schedule Should Be