Final answer:
The question involves calculating the recessionary gap given a real GDP of $6.0 trillion and a full employment output of $7.0 trillion. The calculated gap is a $1.0 trillion difference between the current level of real GDP and the potential GDP, which exceeds the options provided in the question.
option b is the correct
Step-by-step explanation:
The question pertains to identifying the size of a real GDP gap when aggregate demand is represented by AD1 and the full employment output is $6.0 trillion.
Given the provided figures, where the full employment level of GDP is set at $7,000 billion (or $7.0 trillion), and the actual real GDP is $6,000 billion (or $6.0 trillion), we can ascertain that the economy is experiencing a shortfall from its full employment level. This shortfall is referred to as a recessionary gap.
To calculate the exact size of the GDP gap, we subtract the current level of real GDP ($6.0 trillion) from the potential GDP ($7.0 trillion).
The difference is $1.0 trillion, which represents the size of the recessionary gap. Hence, none of the proposed options A ($200 billion), B ($400 billion), C ($200 billion × MPC), or D ($400 billion × MPC) match the calculated recessionary gap of $1.0 trillion. Therefore, an additional option, say 'E. $1.0 trillion', would be the correct answer if provided.