449,296 views
29 votes
29 votes
aWithin the framework of the Keynesian Cross model, if an economy is operating at a real GDP less than full-employment real GDP:

User AAlvz
by
3.1k points

1 Answer

20 votes
20 votes

Answer:

if an economy is operating at less than full employment it is the recession situation

Step-by-step explanation:

The GDP gap can be defined as the difference between potential GDP and actual GDP when both are measured in real terms. When the economy is under a situation of recession, the GDP gap is positive, meaning the economy is operating at less than potential (and less than full employment, in the opinion of the Keynesian that the solution to a recession is expansionary fiscal policy, such as tax reduction to increase consumption and investment and direct increases in government spending, either of which would lead to shifting the aggregate demand curve to the right. For eg, if aggregate demand was originally at so that the economy was in recession, the correct policy would be for the government to shift aggregate demand to the right from where the economy would be at potential GDP and full employment

User Demion
by
3.0k points