Use the following to answer question 28 Figure Inflationary

Last updated: 12/10/2023

Use the following to answer question 28 Figure Inflationary and Recessionary Gaps Panel a LRAS SRAS AD Price level P3 P P Y Yp Real GDP Price level P3 P P Panel b LRAS C is a long run equilibrium D is caused by flexible wages and prices Yp Y Real GDP A is equal to potential output B when compared with Y would reveal an inflationary gap SRAS 28 Figure Inflationary and Recessionary Gaps In Panel b the level of income associated with Y AD