output gaps

Question 1

negative output gap

Answer 1

where actual output is less than potential output. could be known as a deflation or recession gap

Question 2

positive output gap

Answer 2

where actual output is greater than potential output. also known as an inflationary gap.

Question 3

AD shifts

Answer 3

when the AD shifts to the right, the actual level of growth will increase because employment decrease, exports become less competitive.