1.a)Draw an A.D/A.S graph showing inflationary gap. b)Draw an A.D/A.S graph showing a recessionary gap. c)Using the same graphs you have drawn in A and B, show what the long run equilibrium position would be in each case if the government did nothing(i.e.,let the economy self-adjust)

1.a)Draw an A.D/A.S graph showing inflationary gap. b)Draw an A.D/A.S graph showing a recessionary gap. c)Using the same graphs you have drawn in A and B, show what the long run equilibrium position would be in each case if the government did nothing(i.e.,let the economy self-adjust)

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter19: The Keynesian Model In Action

Section: Chapter Questions

Problem 8SQP

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Question

1.a)Draw an A.D/A.S graph showing inflationary gap.

b)Draw an A.D/A.S graph showing a recessionary gap.

c)Using the same graphs you have drawn in A and B, show what the long run equilibrium position would be in each case if the government did nothing(i.e.,let the economy self-adjust)

2.Explain how savings function is derived from the consumption function, and how the saving schedule and graph of the saving function are constructed

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