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The accompanying diagram shows the current macroeconomic situation for the economy of Albernia. You have been hired as an economic consultant to help the economy
The accompanying diagram shows the current
macroeconomic situation for the economy of
Albernia. You have been hired as an economic
consultant to help the economy move to
potential output, YP.
a) Is Albernia facing a recessionary or
inflationary gap?
b) Which type of fiscal
policy?expansionary or
contractionary?would move the
economy of Albernia to potential output, YP? What are some examples of such policies?
c) Illustrate the macroeconomic situation in Albernia with a diagram after the successful fiscal policy has been implemented
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