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-(Figure: Output Gap) Refer to Figure: Output Gap.If the economy is producing at Y₂,then it has a(n) _____ gap,as _____ real GDP exceeds _____ real GDP,and the Bank of Canada should use _____ monetary policy.

Question

Use the following to answer questions:

-(Figure: Output Gap) Refer to Figure: Output Gap.If the economy is producing at Y₂,then it has a(n) _____ gap,as _____ real GDP exceeds _____ real GDP,and the Bank of Canada should use _____ monetary policy.

Quizplus · Accepted Answer

When the economy is producing at Y2, it indicates a recessionary gap because potential real GDP exceeds actual real GDP. In such a situation, the Bank of Canada should use expansionary monetary policy to stimulate the economy.

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