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Current macroeconomic situation in county X is shown on graph below. Help this economy move back to full employment at 10 trillion real GDP by
Current macroeconomic situation in county X is shown on graph below. Help this economy move back to full employment at 10 trillion real GDP by answering the following questions.
I. Is country X facing a) Recessionary gap, or b) Inflationary gap?
II. Country X should use, a) Expansionary, or b) Contractionary Fiscal Policy.
III. How would your chosen fiscal policy be implemented?
IV. Will a successful implementation of the policy in part III result in a shift in AD or SRAS, explain why.
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