Use the graph below to explain the inflationary expenditure gap.
What will be an ideal response?
Based on the graph we see there is an inflationary expenditure gap of $25 billion. Real GDP will be $500, the full employment level, but there will be inflation. This will result in demand-pull inflation.
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Explain the characteristics of monopolistic competition. Explain how price and output are determined in monopolistic competition. Illustrate your answer with a graph
What will be an ideal response?
Economic theory indicates that the behavior of
a. government employees differs from the behavior of employees in the private sector because government employees generally disregard their own personal self-interest when making decisions. b. elected public officials differs from the behavior of all other individuals in society because they are not influenced by private interests. c. individuals when they make decisions about who to vote for is very different from the behavior of these same individuals when they make other types of choices. d. voters, government employees, and public officials is best understood by applying the same basic principle we use to predict the behavior of people in the private sector--that incentives matter.
____ GDP uses current prices while ____ GDP uses prices adjusted for inflation
Fill in the blank(s) with the appropriate word(s).
Along a linear downward-sloping demand curve, the price elasticity of demand will be:
A. equal to zero across each price range. B. less than one across each price range. C. different across each price range. D. greater than one across each price range.