Exhibit 11-8
-If the economy is at point H in Exhibit 11-8, there is a(n)
A)expansionary gap of $300 billion (i.e., $0.3 trillion)
B)contractionary gap of $300 billion
C)contractionary gap of 10
D)expansionary gap of 20
E)expansionary gap of 10

Question

Exhibit 11-8 
-If the economy is at point H in Exhibit 11-8, there is a(n)
A)expansionary gap of $300 billion (i.e., $0.3 trillion) 
B)contractionary gap of $300 billion 
C)contractionary gap of 10 
D)expansionary gap of 20 
E)expansionary gap of 10

Quizplus · Accepted Answer

At point H, the actual output is below the potential output or the long-run equilibrium level of output, indicated by the 45-degree line. This suggests that there is a contractionary gap or a negative output gap, which is the difference between potential output and actual output, equal to $300 billion.

Exhibit 11-8 -If the Economy Is at Point H in Exhibit 11-8