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

Consider the diagram in the next column, in which the current short-run equilibrium is at point A, and answer the questions that follow.
a. What type of gap exists at point A?
b. If the marginal propensity to consume equals 0.75, what change in government spending financed by borrowing from the private sector could eliminate the gap identified in part (a)? Explain.

LRAS SRAS 9 122 8118 114 AD 0) 5.0 15.8 16.6 Real GDP per Year (S trillions)

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