Question

Explain completely. Make sure and post the question along with the answer.
 

 

The three states the economy can be in; Recessionary Gap, Inflationary Gap and LongRun Equilibrium.

 How each of these states are depicted graphically.

 How these three states are represented in the new PPF developed in this chapter. 

At each of the three states, explain what is going on in the labor market.  

I am asking you each to post one YouTube video on the section I am assigning you.  Look for a good video, watch the entire video and then write two ways specifically it illustrated a concept in your assigned section of the Key Concepts.

Answer 1

A recessionary gap is a macroeconomic term which describes an economy operating at a level below its full-employment equilibrium. Under a recessionary gap condition, the level of real gross domestic product (GDP) is lower than the level of full employment, which puts downward pressure on prices in the long run. Also known as a contractionary gap, a recessionary gap is a difference between a country’s potential GDP at full employment and the current employment level within the economy. Often, these gaps are evident during times of economic downturn and associated with higher unemployment numbers.

An inflationary gap is a macroeconomic concept that describes the difference between the current level of real gross domestic product (GDP) and the anticipated GDP that would be experienced if an economy is at full employment. This is also referred to as the potential GDP. For the gap to be considered inflationary, the current real GDP must be the higher of the two metrics.