Output gaps

Discuss the view that high levels of employment are always beneficial for an economy.

An economy's long-run trend rate of economic growth in real gross domestic product (GDP) is 2.8% per annum. In 2018, the economy's actual real GDP was equal to its trend level of real GDP. Table 4 shows the economy's actual rate of growth in real GDP over a five-year period.

All other things being equal, in which year was the economy likely to experience the most inflationary pressure?

An economy operating at its long-run productive capacity at the start of 2020 has a trend rate of growth of 6% per year. Real GDP increases by 2% in 2021 and 10% in 2022.

Which one of the following accurately describes the position of the economy at the end of

Explain the main problems for an economy of having a large positive output gap.

In 2019, an economy operating at full capacity on its long-run aggregate supply curve grew at its trend growth rate of 5% per annum. It had a national income of £200 billion. In 2020, the economy experienced 2% actual growth.

It follows that in 2020 there was

Figure 1 shows three aggregate demand (AD) curves, a short-run aggregate supply (SRAS) curve and a long-run aggregate supply (LRAS) curve.

In Figure 1, when