The figure above shows a nation's aggregate demand curve,aggregate supply curve,and potential GDP.
-In the figure above,the ________ gap is one trillion dollars.To close the gap,the government can change expenditure by ________ one trillion dollars.
A)recessionary;less than
B)inflationary;exactly
C)inflationary;more than
D)recessionary;more than
E)recessionary;exactly

Question

The figure above shows a nation's aggregate demand curve,aggregate supply curve,and potential GDP.
-In the figure above,the ________ gap is one trillion dollars.To close the gap,the government can change expenditure by ________ one trillion dollars.
A)recessionary;less than 
B)inflationary;exactly 
C)inflationary;more than 
D)recessionary;more than 
E)recessionary;exactly

Quizplus · Accepted Answer

A recessionary gap occurs when an economy's real GDP is lower than its potential GDP, indicating underutilization of resources. To close this gap, the government can increase expenditure by less than one trillion dollars due to the multiplier effect, which amplifies the impact of government spending on the economy.

The Figure Above Shows a Nation's Aggregate Demand Curve,aggregate Supply