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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

Illustrate graphically how government can use supply-side fiscal policy to get an economy out of a recessionary gap.

To determine

Identify the role of supply side fiscal policy to eliminate recessionary gap.

Explanation

Figure-1 indicates the impact of supply side fiscal policy when the economy faces recessionary gap as shown below:

In Figure-1, the vertical axis measures the price level and the horizontal axis measures   the real GDP. At the initial stage, economy is indicated by the point Q1, where the economy faces a recessionary gap...

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