According to the AD-AS model,the economy depicted in the diagram below has a(n)___________ gap of size ___________.

Question

Quizplus · Accepted Answer

The economy depicted in the diagram has a leftward shift in the aggregate demand curve, resulting in a recessionary gap. The gap can be calculated by measuring the distance between the potential output (Yp) and the equilibrium level of real GDP (Y) at the current price level. In this case, the potential output is 500 and the equilibrium real GDP is 450, so the gap size is 500-450=50. Therefore, the correct answer is D) recessionary;50.

According to the AD-AS Model,the Economy Depicted in the Diagram