Question

Refer to Table 9.2. (Data are expressed in billions of dollars).

Answer 1

Answer:

A)There is a recessionary gap of $25 billion.

Step-by-step explanation:

Full Employment   Consumers   Investors    Total Private    Total Saving

Income (Output)     Desire to      Desire to        Spending

                               Spend             Spend

$500                       $300                  $250           $___            $___

600                           375                   250             $___            $___

700                           450                   250             $___            $___

800                           525                   250            $___             $___

Total Private spending = Consumers desire to spend + Investors desire to spend

Total savings = Income - Total private spending

Using these formulas :

Solution Table

Full Employment   Consumers   Investors    Total Private    Total Saving

Income (Output)     Desire to      Desire to        Spending

                               Spend             Spend

$500                       $300                  $250           550            -50

600                           375                   250             625            -25

700                           450                   250             700              0

800                           525                   250            775              25

If the full-employment level of income (YF) in Table 9.2 is $800 billion So, There is a recessionary gap of $25 billion. Since total saving is $25

So, Option A is true .