Question #59603

AS/AD Model.
AD: P = 90 - 3Y.
AS: P = 15.
PO: Y = 30.
What is the Inflationary Gap?

Expert's answer

Find macroeconomic equilibrium, when total demand=total supply

P=90-3Y=15

Y (actual GDP) =25

When actual GDP is below the potential GDP the economy has negative output gap, also called as recessionary gap.

Inflationary Gap = Actual GDP- Potential GDP=25-30=-5

We received negative inflationary gap, also called as recessionary gap.

The inflationary gap equals minus 5.

P=90-3Y=15

Y (actual GDP) =25

When actual GDP is below the potential GDP the economy has negative output gap, also called as recessionary gap.

Inflationary Gap = Actual GDP- Potential GDP=25-30=-5

We received negative inflationary gap, also called as recessionary gap.

The inflationary gap equals minus 5.

## Comments

## Leave a comment