Illustrate diagrammatically how a self-regulating economy removes itself from a recessionary gap.

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Answer 1

Question

Chapter 9, Problem 1VQP

To determine

Illustrate diagrammatically how a self-regulating economy removes itself from a recessionary gap.

Expert Solution & Answer

Explanation of Solution

Figure-1 shows the recessionary gap as follows:

Macroeconomics (Book Only), Chapter 9, Problem 1VQP

In Figure-1, the horizontal axis measures the real GDP and the vertical axis measures the price level.

If the economy is in the recessionary gap, then the level of output is less than the full employment level. Since there is surplus in the labor market, wage rate decreases, and it shifts the short-run aggregate supply (SRAS)) curve rightward. Thus, the equilibrium point occurs at Point 2 in Figure-1.

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Students have asked these similar questions

Q1. Explain and diagrammatically represent how a self-regulating economy removes itself from a recessionary gap

Discuss characteristics of an economy that helps itself correct from a recessionary gap.

Explain why is it possible that the economy will not self-correct out of a recessionary gap?

Answer 2

Question

Chapter 9, Problem 1VQP

To determine

Illustrate diagrammatically how a self-regulating economy removes itself from a recessionary gap.

Expert Solution & Answer

Explanation of Solution

Figure-1 shows the recessionary gap as follows:

Macroeconomics (Book Only), Chapter 9, Problem 1VQP

In Figure-1, the horizontal axis measures the real GDP and the vertical axis measures the price level.

If the economy is in the recessionary gap, then the level of output is less than the full employment level. Since there is surplus in the labor market, wage rate decreases, and it shifts the short-run aggregate supply (SRAS)) curve rightward. Thus, the equilibrium point occurs at Point 2 in Figure-1.

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Answer 3

Question

Chapter 9, Problem 1VQP

To determine

Illustrate diagrammatically how a self-regulating economy removes itself from a recessionary gap.

Expert Solution & Answer

Explanation of Solution

Figure-1 shows the recessionary gap as follows:

Macroeconomics (Book Only), Chapter 9, Problem 1VQP

In Figure-1, the horizontal axis measures the real GDP and the vertical axis measures the price level.

If the economy is in the recessionary gap, then the level of output is less than the full employment level. Since there is surplus in the labor market, wage rate decreases, and it shifts the short-run aggregate supply (SRAS)) curve rightward. Thus, the equilibrium point occurs at Point 2 in Figure-1.

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Answer 4

Question

Chapter 9, Problem 1VQP

To determine

Illustrate diagrammatically how a self-regulating economy removes itself from a recessionary gap.

Expert Solution & Answer

Explanation of Solution

Figure-1 shows the recessionary gap as follows:

Macroeconomics (Book Only), Chapter 9, Problem 1VQP

In Figure-1, the horizontal axis measures the real GDP and the vertical axis measures the price level.

If the economy is in the recessionary gap, then the level of output is less than the full employment level. Since there is surplus in the labor market, wage rate decreases, and it shifts the short-run aggregate supply (SRAS)) curve rightward. Thus, the equilibrium point occurs at Point 2 in Figure-1.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 9, Problem 1VQP

To determine

Illustrate diagrammatically how a self-regulating economy removes itself from a recessionary gap.

Expert Solution & Answer

Explanation of Solution

Figure-1 shows the recessionary gap as follows:

Macroeconomics (Book Only), Chapter 9, Problem 1VQP

In Figure-1, the horizontal axis measures the real GDP and the vertical axis measures the price level.

If the economy is in the recessionary gap, then the level of output is less than the full employment level. Since there is surplus in the labor market, wage rate decreases, and it shifts the short-run aggregate supply (SRAS)) curve rightward. Thus, the equilibrium point occurs at Point 2 in Figure-1.

Answer 6

Chapter 9, Problem 1VQP

To determine

Illustrate diagrammatically how a self-regulating economy removes itself from a recessionary gap.

Expert Solution & Answer

Explanation of Solution

Figure-1 shows the recessionary gap as follows:

Macroeconomics (Book Only), Chapter 9, Problem 1VQP

In Figure-1, the horizontal axis measures the real GDP and the vertical axis measures the price level.

If the economy is in the recessionary gap, then the level of output is less than the full employment level. Since there is surplus in the labor market, wage rate decreases, and it shifts the short-run aggregate supply (SRAS)) curve rightward. Thus, the equilibrium point occurs at Point 2 in Figure-1.

Answer 7

Chapter 9, Problem 1VQP

To determine

Illustrate diagrammatically how a self-regulating economy removes itself from a recessionary gap.

Answer 8

Expert Solution & Answer

Explanation of Solution

Figure-1 shows the recessionary gap as follows:

Macroeconomics (Book Only), Chapter 9, Problem 1VQP

In Figure-1, the horizontal axis measures the real GDP and the vertical axis measures the price level.

If the economy is in the recessionary gap, then the level of output is less than the full employment level. Since there is surplus in the labor market, wage rate decreases, and it shifts the short-run aggregate supply (SRAS)) curve rightward. Thus, the equilibrium point occurs at Point 2 in Figure-1.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Ch. 9.1 - Prob. 1ST Ch. 9.1 - Prob. 2ST Ch. 9.1 - Prob. 3ST Ch. 9.2 - Prob. 1ST Ch. 9.2 - Prob. 2ST Ch. 9.2 - Prob. 3ST Ch. 9.3 - Prob. 1ST Ch. 9.3 - Prob. 2ST Ch. 9.3 - Prob. 3ST Ch. 9 - Prob. 1VQP

Illustrate diagrammatically how a self-regulating economy removes itself from a recessionary gap.

Illustrate diagrammatically how a self-regulating economy removes itself from a recessionary gap.

Explanation of Solution

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