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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

Diagrammatically represent an economy in a recessionary gap. Next, identify where the economy in a recessionary gap lies in terms of both the institutional PPF and the physical PPF.

To determine

The diagrammatic explanation of a recessionary gap in terms of both institutional PPF and physical PPF.

Explanation

Figure-1 shows the recessionary gap as follows:

In Figure-1, the horizontal axis measures the real GDP and the vertical axis measures the price level.

If an economy is in the recessionary gap, then the level of output is less than the full employment level. In this case, the actual unemployment rate is more than the natural unemployment rate...

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