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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

Use the AD/AS model to explain bow an inflationary gap occurs, beginning from the initial equilibrium in Figure 25.6.

Chapter 25, Problem 3SCQ, Use the AD/AS model to explain bow an inflationary gap occurs, beginning from the initial , example  1

Chapter 25, Problem 3SCQ, Use the AD/AS model to explain bow an inflationary gap occurs, beginning from the initial , example  2

To determine

To state: the reasons for the occurrence of inflationary gap.

Explanation

It means people are demanding more goods and services than can be produced. In other words, the amount by which the actual aggregate demand exceeds the level of national income corresponding to full employment is known as inflationary gap.

In the above diagram, Income is measured on x-axis and total expenditure is measured on y-axis...

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