In the country of Potimia in 1998, price level was rising very rapidly. Actual RGDP was $900
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In the country of Potimia in 1998, price level was rising very rapidly. Actual RGDP was $900 billion and Potential RGDP was $850 billion.
Was this economy in a recessionary gap or inflationary gap in 1990? Explain.
The government of Genovia responded to the problem by significantly decreasing government spending. As a result of this policy, what happened to Real GDP in Potemia?
What happened to the price level? If spending multipier is 2.5, how large should the cahnge in government spending be to close the gap?
Expert Answer:
Step 11 QUESTION 1 This economy was in an inflationary gap The actual RGDP was greater than the potential RGDP which meant that there was more demand for goods and services than there were available T... View the full answer
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