For an economy starting at potential output, an increase in one or more of the components of aggregate expenditure in the short run results in a(n):

Question

Quizplus · Accepted Answer

An increase in in one or more of the components of aggregate expenditure will result in a higher equilibrium output. For an economy with output equal to its potential, an increase in short-run equilibrium output creates an expansionary output gap.

For an Economy Starting at Potential Output, an Increase in One