Planned AE (PAE, trillion $) 45° AE = Y PAE₂= 7+0.5Y PAE = 5+ 0.5Y PAE = 3 +0.5Y Actual AE (GDP, Y, trillion $) Refer to a graph above. Suppose the the economy has the planned aggregate expenditure of PAE2 and the potential GDP is $10 trillion. Which of the following statements about this economy is false? O There is an inflationary output gap of $4 trillion. O In order for this economy to get back to the potential GDP, the PAE curve needs to shift to the right The economy is in an expansion. O The economy produces more than spends.

Planned AE (PAE, trillion $) 45° AE = Y PAE₂= 7+0.5Y PAE = 5+ 0.5Y PAE = 3 +0.5Y Actual AE (GDP, Y, trillion $) Refer to a graph above. Suppose the the economy has the planned aggregate expenditure of PAE2 and the potential GDP is $10 trillion. Which of the following statements about this economy is false? O There is an inflationary output gap of $4 trillion. O In order for this economy to get back to the potential GDP, the PAE curve needs to shift to the right The economy is in an expansion. O The economy produces more than spends.

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter9: Aggregate Demand

Section: Chapter Questions

Problem 4.8P

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