Econ 4th Edition by William McEachern

Exercise 3

EXPANSIONARY AND RECESSIONARY GAPS Answer the following questions on the basis of the following graph:
a. If the actual price level exceeds the expected price level reflected in long-term contracts, real GDP equals _______ and the actual price level equals _______ in the short run.
b. The situation described in part (a) results in a(n) _______ gap equal to _______.
c. If the actual price level is lower than the expected price level reflected in long-term contracts, real GDP equals _______ and the actual price level equals _______ in the short run.
d. The situation described in part (c) results in a(n) _______ gap equal to _______.
e. If the actual price level equals the expected price level reflected in long-term contracts, real GDP equals _______ and the actual price level equals _______ in the short run.
f. The situation described in part (e) results in ______ gap equal to _______.