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Using the Aggregate Expenditure-Output Model, Assume the Aggregate Expenditures (AE)

Question 97

Multiple Choice

Using the aggregate expenditure-output model, assume the aggregate expenditures (AE) line is below the 45-degree line at full-employment GDP. This vertical distance is called a(n) :


A) inflationary gap.
B) recessionary gap.
C) negative GDP gap.
D) marginal propensity to consume gap.

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