Assume the following to answer the following questions: C= 1000+ .9 (Y-T) Tax rate = 0.1Y Imports = 0.1(Y-T) Government spending = 200 Investment = 300 Exports = 600 Potential Output = $8000 The economy described above is in the ["recessionary", "inflationary"] gap of the AD/AS Model.

Assume the following to answer the following questions: C= 1000+ .9 (Y-T) Tax rate = 0.1Y Imports = 0.1(Y-T) Government spending = 200 Investment = 300 Exports = 600 Potential Output = $8000 The economy described above is in the ["recessionary", "inflationary"] gap of the AD/AS Model.

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter10: Keynesian Macroeconomics And Economic Instability: A Critique Of The Self Regulating Economy

Section: Chapter Questions

Problem 20QP

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Question

100%

Assume the following to answer the following questions:

C= 1000+ .9 (Y-T)
Tax rate = 0.1Y
Imports = 0.1(Y-T)
Government spending = 200
Investment = 300
Exports = 600
Potential Output = $8000

The economy described above is in the ["recessionary", "inflationary"] gap of the AD/AS Model.

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Step 1: Define Aggregate demand:-

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