After reviewing Exhibit 3 in this chapter, explain why recessionary gaps occur only in the short run

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After reviewing Exhibit 3 in this chapter, explain why recessionary gaps occur only in the short run and only when the actual price level is below what was expected.

Price level 110 105 100 0 Lit d I I Potential output LRAS T a 4D 13.8 14.0 Recessionary gap SRAS 110 AD

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Economics A Contemporary Introduction

ISBN: 9781305505469

11th Edition

Authors: William A. McEachern

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Question Posted: Oct 08, 2023 02:54 AM

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After reviewing Exhibit 3 in this chapter, explain why recessionary gaps occur only in the short run

Question:

Price level 110 105 100 0 Lit d I I Potential output LRAS T a 4D 13.8 14.0 Recessionary gap SRAS 110 AD" SRAS 100 Real GDP (trillions of dollars)

Step by Step Answer:

In the long run the actual and expected price levels equal one another wh...View the full answer

Economics A Contemporary Introduction

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