Question: Consider the diagram below, in which the current short-run equilibrium is at point A, and answer the questions that follow. a. What type of gap

Consider the diagram below, in which the current short-run equilibrium is at point A, and answer the questions that follow.
Consider the diagram below, in which the current short-run equilibrium

a. What type of gap exists at point A?
b. If the marginal propensity to save equals 0.20, what change in government spending financed by borrowing from the private sector could eliminate the gap identified in part (a)? Explain.

LRAS SRAS 120- 115 AD 18.0 18.5 19.0 Real GDP per Year (S trillions)

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