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Contractionary gap can be controlled by

04/10/2021 Client: muhammad11 Deadline: 2 Day

a. Define a recessionary gap. Draw the LRAS curve to show a recessionary (contractionary gap) gap. b. Show the condition of the labor (and other resource) markets. Draw the labor market diagram next to the AS/AD diagram. c. Show and explain how a recessionary (contractionary) gap is closed using a nonintervention policy. SRAS, Price Level Ø 6 10 7 8 9 Real GDP d. e. Draw the LRAS curve to show an inflationary (expansionary) gap. What is a stabilization policy? SRAS, Price Level 10 7 8 9 Real GDP f. Show and explain how an inflationary (expansionary) gap is closed using a stabilization policy.

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