What is an Expansionary Gap? - Identifying an Economy That is Above Potential

Instructions:

Choose an answer and hit 'next'. You will receive your score and answers at the end.

question 1 of 3

How would we describe an economy that corresponds to the following image?

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1. What needs to be true for there to be an expansionary gap?

2. What is the major problem with expansionary gaps?

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About This Quiz & Worksheet

There are numerous financial aspects to consider when an expansionary gap occurs in an economy. This quiz and worksheet combination will test you on your ability to read related graphs and answer pertinent questions about the economy.

Quiz & Worksheet Goals

This quiz will test you on:

  • What happens during an expansionary gap
  • Your ability to decipher graphs pertaining to the economy
  • Definition of potential output
  • Main problem evident with expansionary gaps

Skills Practiced

You will have opportunities to practice the following skills:

  • Reading comprehension - ensure that you draw the most important information from the related economic lesson on expansionary gaps
  • Interpreting information - verify that you can read a chart depicting an economy and interpret it correctly
  • Information recall - access the knowledge you've gained regarding the main problem with an expansionary gap

Additional Learning

Further your understanding by reviewing the accompanying lesson, What is an Expansionary Gap? - Identifying an Economy That is Above Potential. This lesson will detail:

  • Potential output and an expansionary gap
  • Inflation and an inflationary gap
  • Short-run and long-run aggregate supply
  • Illustrations of expansionary gaps
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