3 years ago

Suppose the economy is currently in short run macroeconomic equilibrium, with actual GDP bigger than potential GDP.

Business

1 answer:

krek1111 [17]3 years ago

5 0

Answer:

attached below

Explanation:

Given that the economy has its actual GDP > potential GDP

A) using AD-AS to depict the situation

attached below is the graph

The gap( Lf - L1 ) is called inflationary gap

x-axis = real GDP , Y-axis = price level,

AD = aggregate demand curve , S = short run aggregate supply curve

L = long run aggregate supply curve,

B) In the long run the graph will adjust to the full employment level

attached below is the graph

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