Question:
For an economy starting at potential output, a decrease in autonomous expenditure in the short-run results in a(n):
A. increase in potential output
B. recessionary output gap
C. decrease in potential output
D. expansionary output gap
Answer:
The correct answer is B
Explanation:
A decrease in autonomous expenditure shifts the Planned Aggregate Expenditure curve downward thus creating a lower equilibrium output.
PAE = C + Ip + G + NX
where
PAE = Planned Aggregate Expenditure
C = consumption
Ip = Investment Spending
G = Government Spending
NX = Net Export
If an economy has its output equal to its potential, this will create a reduction in short-run equilibrium output leading to a recessionary output gap.
Cheers!
We can assume that Amy’s perceptual abilities is that she
may not be able to see color because she is considered or described to a
monochromat base on the findings that is seen from her or base from the school
records that has been provided.
is a person who benefits from something without expending effort or paying for it.
<span>A rapid increase in the money supply may lead to a "Deflation"
Hope this helps!
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