Suppose the relationship between price level and aggregate demand in an economy is given by this formula: P = 128 - 0.2Y, and the potential GDP in the economy is: 284. If the price level is 107, calculate the output gap in the economy.

Suppose the relationship between price level and aggregate demand in an economy is given by this formula: P = 128 - 0.2Y, and the potential GDP in the economy is: 284. If the price level is 107, calculate the output gap in the economy.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter22: Aggregate Demand And Aggregate Supply

Section: Chapter Questions

Problem 1P

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Question

Suppose the relationship between price level
and aggregate demand in an economy is
given by this formula: P = 128 - 0.2Y, and
the potential GDP in the economy is: 284. If
the price level is 107, calculate the output
gap in the economy.

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