The Figure Given Below Depicts Macroeconomic Equilibrium in a Closed

The figure given below depicts macroeconomic equilibrium in a closed economy. Assume that the spending multiplier in this economy is 1.5.
Figure 10.5

-Refer to Figure 10.5. If the target or potential level of real GDP is $1,200, then at an equilibrium real GDP level of $900:

A) the GDP gap is zero.
B) there exists a recessionary gap that could be closed by a $200 decrease in planned aggregate expenditures.
C) the GDP gap is $200.
D) actual real GDP exceeds potential real GDP by $300.
E) there exists a recessionary gap that could be closed by a $200 increase in autonomous investment spending.

Correct Answer:

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