Answer the following questions on the basis of the following graph:

a. If the actual price level exceeds the expected price level reflected in long-term contracts, real GDP equals ________ and the actual price level equals ________ in the short run.

b. The situation described in part (a) results in a(n) ________ gap equal to ________.

c.  If the actual price level is lower than the expected price level reflected in long-term contracts, real GDP equals ________ and the actual price level equals ________ in the short run.

d. The situation described in part (c ) results in a(n) ________ gap equal to ________.

e. If the actual price level equals the expected price level reflected in long-term contracts, real GDP equals ________ and the actual price level equals ________ in the short run.

f. The situation described in part (e) results in ________ gap equal to ________.

Transcribed Image Text:

Price level 130. 120 110 0 Potential output SRAS 16.7 17.0 17.2 Real GDP (trillions of dollars)