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Question 1 why does an increase in potential GDP leave the economy in a recessionary gap? Question 2 SUPPOSE THE ECONOMY OF BUNDERLAND IS INITIALLY

Question 1 why does an increase in potential GDP leave the economy in a recessionary gap?

Question 2 SUPPOSE THE ECONOMY OF BUNDERLAND IS INITIALLY AT FULL EMPLOYMENT EQUILIBRIUM EXPLAIN IN TERM OF SHIFTS IN AD OR AS HOW THE FOLLOWING RESULTS WILL OCCUR

  • Real GDP increases; the price level increases, the economy is experiencing an inflationary Gap.
  • Real GDP increases; the price level decreases, the economy is experiencing an inflationary Gap.
  • Real GDP decreases; the price level increases, the economy is experiencing an inflationary Gap.

Question 3 How does The Economy Adjust if there is a recessionary gap? if there is inflationary gap?

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