Economics (Book Only)
12th Edition
ISBN: 9781305465459
Author: Arnold
Publisher: Cengage
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Question
Chapter 9, Problem 1VQP
To determine
Illustrate diagrammatically how a self-regulating economy removes itself from a recessionary gap.
Expert Solution & Answer
Explanation of Solution
Figure-1 shows the recessionary gap as follows:
In Figure-1, the horizontal axis measures the real
If the economy is in the recessionary gap, then the level of output is less than the full employment level. Since there is surplus in the labor market, wage rate decreases, and it shifts the short-run
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Q1. Explain and diagrammatically represent how a self-regulating economy removes itself from a recessionary gap
Discuss characteristics of an economy that helps itself correct from a recessionary gap.
What are characteristics of an economy that helps itself correct from a recessionary gap.
Chapter 9 Solutions
Economics (Book Only)
Ch. 9.1 - Prob. 1STCh. 9.1 - Prob. 2STCh. 9.1 - Prob. 3STCh. 9.2 - Prob. 1STCh. 9.2 - Prob. 2STCh. 9.2 - Prob. 3STCh. 9.3 - Prob. 1STCh. 9.3 - Prob. 2STCh. 9.3 - Prob. 3STCh. 9 - Prob. 1VQP
Ch. 9 - Prob. 2VQPCh. 9 - Prob. 3VQPCh. 9 - Prob. 4VQPCh. 9 - Prob. 5VQPCh. 9 - Prob. 1QPCh. 9 - Prob. 2QPCh. 9 - Prob. 3QPCh. 9 - Prob. 4QPCh. 9 - Prob. 5QPCh. 9 - Prob. 6QPCh. 9 - Prob. 7QPCh. 9 - Prob. 8QPCh. 9 - Prob. 9QPCh. 9 - Prob. 10QPCh. 9 - Prob. 11QPCh. 9 - Prob. 12QPCh. 9 - Prob. 13QPCh. 9 - Prob. 14QPCh. 9 - Prob. 15QPCh. 9 - Prob. 16QPCh. 9 - Prob. 17QPCh. 9 - Prob. 18QPCh. 9 - Prob. 1WNGCh. 9 - Prob. 2WNGCh. 9 - Prob. 3WNGCh. 9 - Prob. 4WNGCh. 9 - Prob. 5WNGCh. 9 - Prob. 6WNG
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- Topic 2. Discuss characteristics of an economy that helps itself correct from a recessionary gap.arrow_forwardDescribe the differences between recessionary and inflationary gaps.arrow_forwardIn our modern economy, the adjustment process necessary to eliminate a recessionary gap is very rapid. True or Falsearrow_forward
- Please answer the question: * the attached photo is for you to see that it is connected to the question * If current real GDP is P700 billion, which of the following policies would bring the economy to potential output? a. decrease taxes by P100 billion b. increase taxes by P100 billion c. decrease taxes by P25 billion d. increase taxes by P25 billionarrow_forwardChapter 11 shows that increased government purchases, with taxes held constant, can eliminate a recessionary gap. How could a tax cut achieve the same result?arrow_forwardExplain and illustrate graphically recessionary and inflationary gaps.arrow_forward
- True or false? Explain why. "The marginal propensity to consume out of transitory income is greater than the marginal propensity to consume out of permanent income."arrow_forwardconsumption boom: Using the IS-MP diagram, explain what happens to theeconomy if there is a temporary consumption boom that lasts for one period.arrow_forwardQuestion 4Assume that the economy has a recessionary gap. Explain how the economy will remove this gap without government intervention. Use graphs to illustrate your answer. Assume that the economy has an inflationary gap. Explain how the economy will remove this gap without government intervention. Use graphs to illustrate your answer.arrow_forward
- Does Ricardian equivalence imply that changes in the timing of government expenditure have no effect on the economy? Explain.arrow_forwardDefine the term recessionary gap and inflationary gap why do they occurarrow_forwardDiscuss the multiplier effect including a description of what it describes in macroeconomic terms, how it is determined and an illustration of how it is defined.arrow_forward
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