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Figure: Output Gap
-(Figure: Output Gap) Look at the figure Output Gap. If the economy is producing at Y₁, then it has a(n) _____ gap, as _____ real GDP exceeds _____ real GDP, and the Federal Reserve should use _____ monetary policy.

Question

Use the following to answer questions :
Figure: Output Gap

-(Figure: Output Gap) Look at the figure Output Gap. If the economy is producing at Y₁, then it has a(n) _____ gap, as _____ real GDP exceeds _____ real GDP, and the Federal Reserve should use _____ monetary policy.

Quizplus · Accepted Answer

If the economy is producing at Y1, then it has an inflationary gap, as actual real GDP exceeds potential real GDP, and the Federal Reserve should use contractionary monetary policy.

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