Illustrate how fiscal policy can close the expansionary gap

Reference no: EM131227888

In the diagram use aggregate demand and short-run aggregate supply curves to show an economy at a short-run with a $0.5 trillion expansionary gap when potential output is $9.5 trillion. Identify the equilibrium point and price level. Illustrate how fiscal policy can close the expansionary gap.

Reference no: EM131227888

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