2.5 - output gaps

Question 1

what is an output gap

Answer 1

difference between actual and potential output level

Question 2

why is it difficult to measure output gap

Answer 2

data not always reliable

we cant observe potential output

Question 3

draw an ad/as diagram as a classical and keynsian

for negative output gap

check with book

Question 4

draw an ad/as diagram as a classical and keynsian

for postive output gap

check with book

Answer 4

AD at tip of lras

Question 5

what are 4 costs of growth

Answer 5

environment

balance of payments

income inequalities

opportunity cost