Sunday, February 28, 2016

Unit 3 Notes - February 19th, 2016

Full Employment

Full Employment Equilibrium exists where AD intersects SRAS & LRAS at the same point.

Recessionary Gap

A Recessionary Gap exists when equilibrium occurs below the Full Employment output.

Inflationary Gap

An Inflationary Gap exists when equilibrium occurs beyond the Full Employment output.


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1 comment:

  1. Dillon W.March 3, 2016 at 11:17 PM

    When we are looking at gaps such as these, we must take separate approaches in order to close them. In order to close a recessionary gap, we would need to utilize an expansionary fiscal policy. In order to close an inflationary gap on the other hand, we would need to utilize a contractionary fiscal policy.

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