5. Draw an AD-AS diagram for an economy which is facing a
recessionary gap.
a) To eliminate the gap, should the central bank use
expansionary or contractionary
monetary policy?
b) Explain how the interest rate, investment spending,
consumer spending, real GDP, and
the aggregate price level will change as monetary policy
closes the recessionary gap.
C) Draw an AD-AS diagram for an economy which is facing an
inflationary gap.
D)To eliminate the gap, should the central bank use
expansionary or...