Employment - Real Domestic Output - Aggregate Expenditures (C+G+Ig+Xn)
90-500-520
100-550-560
110-600-600
120-650-640
130-700-680
Referring to the above table:
a) If full employment in this economy is 130 million, will there be an inflationary or a recessionary expenditure gap? What will be the consequences of this gap? By how much would aggregate expenditures in column 3 have to change at each level of GDP to eliminate the gap? Explain.
What is the Multiplier?
b) Will there be an inflationary, or a recessionary, gap if the full-employment level of output is $500 billion? What would be the consequences of this gap?