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Macroeconomics

13th Edition
Roger A. Arnold
Publisher: Cengage Learning
ISBN: 9781337617390

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BuyFindarrow_forward

Macroeconomics

13th Edition
Roger A. Arnold
Publisher: Cengage Learning
ISBN: 9781337617390
Chapter 9, Problem 7WNG
Textbook Problem
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Fill in the blank spaces (A–O) in the table that follows. In the table, Q = Real GDP and QN = Natural Real GDP.

Chapter 9, Problem 7WNG, Fill in the blank spaces (AO) in the table that follows. In the table, Q = Real GDP and QN = Natural

To determine

Explain the relationship between recessionary gap, inflationary gap or long run equilibrium.

Explanation of Solution

Inflationary gap:

If the economy is in inflationary gap, then real GDP is more than the natural GDP. In this case, the actual unemployment rate is lower than the natural unemployment rate. There is shortage in the labor market and an economy is above the institutional PPF.

Recessionary gap:

If the 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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