Exhibit 11-1
-The economy characterized by the aggregate demand curve AD and the short-run aggregate supply curve SRAS₅₀in Exhibit 11-1 is facing an expansionary gap.

Question

Exhibit 11-1 -The economy characterized by the aggregate demand curve AD and the short-run aggregate supply curve SRAS₅₀in Exhibit 11-1 is facing an expansionary gap.

Quizplus · Accepted Answer

An expansionary gap occurs when actual output exceeds potential output, which would typically be indicated by the AD curve intersecting the SRAS curve at a point beyond the long-run aggregate supply (LRAS). Without specific details from Exhibit 11-1, we cannot assume an expansionary gap.

Exhibit 11-1 -The Economy Characterized by the Aggregate Demand Curve AD and Curve