SOLVED: A. Draw AD/AS curves showing macroeconomic equilibrium at full employment level of output and an example of a recessionary gap. B. Explain the recessionary gap.
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An economy is facing the recessionary gap shown in the accompanying diagram. To eliminate the gap, should the central bank use expansionary or contractionary monetary policy? How will the interest rate, investment spending, consumer spending, real GDP, and the aggregate price level change as monetary policy closes the recessionary gap? | Numerade
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