Question: In Figure 12.2, (a) Identify the GDP gap when the demand curve is at AD1, (b) Identify the shortfall when the demand curve is at

In Figure 12.2,

(a) Identify the GDP gap when the demand curve is at AD1,

(b) Identify the shortfall when the demand curve is at AD.

Figure 12.2

AS Too much AD: inflation P2 P, AD2 Too little AD: unemployment AD* AD Full employment OF REAL OUTPUT (quantity per year

AS Too much AD: inflation P2 P, AD2 Too little AD: unemployment AD* AD Full employment OF REAL OUTPUT (quantity per year) PRICE LEVEL (average price)

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