Consider an economy in which investment is $200, government purchases are $500, net exports are $30, and the price level is fixed. Taxes vary with income, and as a result, the consumption schedule looks like that shown in the following table. Fill in the missing values. Graph the aggregate expenditure graph using the above data. This is the graph with Aggregate Expenditures on the Y axis and Real GDP on the x axis. Start with a forty five degree line. Suppose that full employment comes at GDP=$1,480. Is the economy in an inflationary or recessionary gap? What action would you take to close the gap?

Consider an economy in which investment is $200, government purchases are $500, net exports are $30, and the price level is fixed. Taxes vary with income, and as a result, the consumption schedule looks like that shown in the following table. Fill in the missing values. Graph the aggregate expenditure graph using the above data. This is the graph with Aggregate Expenditures on the Y axis and Real GDP on the x axis. Start with a forty five degree line. Suppose that full employment comes at GDP=$1,480. Is the economy in an inflationary or recessionary gap? What action would you take to close the gap?

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter11: Gross Domestic Product

Section: Chapter Questions

Problem 4SQ

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