To describe: The equilibrium levels of real output and price level.
Answer to Problem 1TY
There exist an inflationary gap
Explanation of Solution
A recessionary gap emerges when aggregate
Graphical representation
Below figure shows whether the economy has inflationary or recessionary gap.
In the above figure, X axis speaks to the various degrees of cost. Here the upward slanting bend is an inventory bend and descending inclining bend is a demand bend.
Figure 2 obviously shows that there exists an inflationary gap when the full work level of yield is $2,800. This is on the grounds that the equilibrium level of yield $3,000 is more prominent than the full work level of yield $2,800.
Introduction: A recessionary gap is a
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