Question

If full employment in this economy is 150 million, will there be an inflationary expenditure gap or a recessionary expenditure gap?

Answer 1

According to question, there be an inflationary expenditure gap or a recessionary expenditure gap of between 4.2 % .

Recessionary expenditure gap ?

A recessionary gap, also known as a contractionary gap, is the discrepancy between actual and prospective production in an economy. Gross domestic product (GDP), a measure of an economy's output used to compare annual growth between nations, is calculated for each country. A slowdown in economic activity that lowers a country's GDP is known as a recession. A contractionary gap in the business cycle occurs when an economy is not operating at equilibrium or at its maximum level of production.

GDP swings are referred to as the business cycle. There are four phases: the trough, growth (or recovery), the peak, and the recession. The low point of the business cycle is during trough times. When production is low and unemployment is high, this happens.

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