Question #59604

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

Expert's answer

Find macroeconomic equilibrium, when total demand=total supply

AD = AS

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.

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

We received negative gap, also called as recessionary gap.

The recessionary gap equals 5.

AD = AS

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.

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

We received negative gap, also called as recessionary gap.

The recessionary gap equals 5.

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