If the economy is in equilibrium, how can a recessionary gap exist, and how will producers respond to this gap?
What will be an ideal response?
Equilibrium occurs where desired spending equals the value of output, but equilibrium may not be at the full-employment level of output. A recessionary gap occurs when the level of spending is less than output at full employment, or the equilibrium output level is less than full-employment output. Producers respond to the recessionary gap by decreasing production and laying off workers.
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An increase in personal income taxes would shift AD to the:
A. Right because C will increase B. Left because C will decrease C. Right because G will increase D. Left because G will decrease
The daily turnover in the foreign exchange market is:
A) millions of dollars. B) billions of dollars. C) trillions of dollars. D) declining in the last decade.
Economic growth policies always involve
a. trade-offs b. lower taxes c. higher government spending d. more investment e. more transfer payments
Recall the Application about how the collapse of the housing boom and the worldwide recession of 2007 led to problems for some countries in the Euro-zone to answer the following question(s). When the euro was launched in 1999, the vision of its founders was to use the monetary union to further unify Europe economically and politically. They envisioned a large economic market, comparable to the United States with integrated goods and financial markets. They believed that by moving to a single currency with agreements on a number of fiscal rules that they could achieve economic stability and growth.Recall the Application. Unlike the Euro-zone, the United States does not just have a single currency, but also has a ________ that provides transfers to areas in economic distress.
A. single central bank B. national trade agreement C. unified fiscal system D. federally funded emergency account