Asked by
Kyler Wilhelm
on Oct 13, 2024Verified
Statement I.When there's a deflationary gap,equilibrium GDP is greater than full employment GDP.
Statement II: Full employment GDP is the level of spending necessary to purchase the output,or aggregate supply,of a fully employed economy.
A) Statement I is true and statement II is false.
B) Statement II is true and statement I is false.
C) Both statements are true.
D) Both statements are false.
Deflationary Gap
A situation where total spending (aggregate demand) in an economy is lower than the level required to sustain full employment output, leading to deflation and unemployment.
Equilibrium GDP
The level of Gross Domestic Product at which aggregate supply equals aggregate demand, leading to an economy operating at full capacity without inflationary pressures.
Full Employment GDP
The level of gross domestic product achieved when there is no cyclical unemployment in the economy, representing an ideal economic state where all willing and able workers find employment.
- Appraise policy measures for dealing with inflationary and deflationary imbalances and their repercussions on full employment GDP.
Verified Answer
FD
Learning Objectives
- Appraise policy measures for dealing with inflationary and deflationary imbalances and their repercussions on full employment GDP.