Economics
5th Edition
ISBN: 9781319066604
Author: Paul Krugman, Robin Wells
Publisher: Worth Publishers
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Question
Chapter 28.A, Problem 2P
To determine
Concept Introduction:
Inflationary gap: At the level of full employment, if the value of the real GDP is greater than the value of potential GDP, it leads to emergence of inflationary gap.
Recessionary gap: At the level of full employment, if the value of the potential GDP is greater than the value of real GDP, it leads to emergence of recessionary gap.
Marginal Propensity to Consume (MPC): It is the proportion which the consumer pays for consumption of goods and services and it does not include the savings of the consumer.
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