Question

During a recessionary gap due to insufficient aggregate demand, the government should ________ spending by an amount determined by the spending multiplier in an attempt to return the economy to potential GDP/full employment. g

Answer 1

Answer:

Increase

Step-by-step explanation:

Recessionary gap is simply defined as that which happens or occurs when the current/actual is less than the needed that is below potential. It is simply when the equilibrium level of real GDP falls short of potential GDP.

Recessionary gap (expansionary FP) can be handled or fixed by increasing government spending, decrease in tax rates and Increasein transfers