According to your own point of view, which specific output gap most impacts the economy, the recessionary gap or inflationary gap? Explain in terms of the negative or positive demand shock (quantity demanded), aggregate price level, the unemployment rate, supply shock (quantity supplied), market equilibrium. 250 words, please!

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Q: a. How much does aggregate demand need to increase to restore the economy to its long-run…

A: Required increase in AD = Potential GDP - real GDP = (500 - 400) billion = $100 billion

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Q: Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household…

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Q: w much does aggregate demand need to change to restore the economy to its long-run equilibrium? ыlon…

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