--%>
Assignment Help - homework help

Inflationary expenditure gap or recessionary expenditure gap

Refer to the table below in answering the questions which follow:

1617_inflationary expenditure gap or recessionary expenditure gap.png

In this economy if full employment is 130 million, will there be an inflationary expenditure gap or recessionary expenditure gap? Describe the consequence of this gap? By how much would aggregate expenditures in column 3 ought to change at each level of GDP to remove the inflationary expenditure gap or recessionary expenditure gap? Illustrates. Describe multiplier in this example?

E

Expert

Verified

A recessionary gap. Equilibrium GDP is $600 billion, whereas full employment GDP is $700 billion. Employment = 20 million less than at full employment. Aggregate expenditures would have to rise by $20 billion (= $700 billion -$680 billion) at each level of GDP to abolish the recessionary gap. The MPC is .8, thus the multiplier is 5.

   Related Questions in Finance Basics

  • Q : Describe depreciation expense Describe

    Describe depreciation expense as it seems on the income statement.  Accounting depreciation is the allocation of asset's primary cost over time. Depreciation cost on an income statement is the amount of the asset=s initial cost allocated to

    		•
  • Q : What is Appropriation Schedule

    Appropriation Schedule: The detail of an appropriation (example, in the Budget Act), exhibiting the distribution of the appropriation to each of the class, programs, or projects thereof.

    		•
  • Q : Why do focusing on cash flows rather

    Why do we focus on cash flows rather than profits while evaluating proposed capital budgeting projects? We targeted on cash flows instead of profits while evaluating proposed capital budgeting projects since it is cash flow that changes the valu

    		•
  • Q : Explain Budget—Program or Traditional

    Budget—Program or Traditional: A program budget states the operating plan in terms of the costs of activities (that is, programs) to be undertaken to attain particular goals and objectives. A traditional (or object of expenses) budget expresses

    		•
  • Q : Nominal GDP and suitable price index

    Normal 0 false false

  • Q : Components of the M1 money supply

    Normal 0 false false

  • Q : State statement of cash flows State

    State three major sections of the statement of cash flows? Cash flows from investing activities Cash flows from Operations Cash flows from financing activities Net change in cash balance Cash balance at beginning of period

    		•
  • Q : Define Overhead Unit Overhead Unit :

    Overhead Unit: The organizational unit which benefits the production of an article or a service however that can’t be directly related with an article or service to share out all of its expenditures to elements and/or work authorizations. The co

    		•
  • Q : Problem of time lags in enacting and

    Normal 0 false false

  • Q : Explain agents and their

    Normal 0 false false

    		•