Suppose Real GDP Is Equal to Potential GDP

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The Answer is If real GDP is equal to potential GDP and the AD curve shifts rightward,it will intersect the AS curve at a point where real GDP exceeds potential GDP.This results in an inflationary gap.The money wage rate rises,which shifts the AS curve leftward.Eventually real GDP returns to potential GDP.
If real GDP is equal to potential GDP and the AD curve shifts leftward,it will intersect the AS curve at a point where real GDP is less than potential GDP.This results in a deflationary gap.The money wage rate falls,which shifts the AS curve rightward.Eventually real GDP returns to potential GDP.

Suppose Real GDP Is Equal to Potential GDP

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Suppose Real GDP Is Equal to Potential GDP

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Correct Answer:VerifiedShow Answer

Correct Answer:
Verified