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Khalil Campero
on Nov 11, 2024

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The aggregate demand-aggregate supply model shows that closing an expansionary gap involves deflation and closing a recessionary gap involves inflation.

Expansionary Gap

A situation in macroeconomics when aggregate output is above potential output, often leading to inflationary pressures.

Recessionary Gap

Describes a situation where the real GDP of an economy is less than its potential GDP, indicating underutilized resources and a sluggish economy.

Deflation

A decrease in the general price level of goods and services in an economy over a period of time, potentially leading to increased unemployment and slower economic growth.

  • Comprehend the consequences of expansionary and recessionary gaps on economic performance.
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Alyssa GaonaNov 13, 2024
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