About This Chapter
Contractionary & Expansionary Gaps - Chapter Summary
This chapter's lessons will show you what happens when an economy is performing below or beyond its bounds, conditions economists refer to as contractionary and expansionary gaps. Our instructors will explain how to measure these gaps, and how this information helps the central bank. After completing the lessons in this chapter, you should be able to:
- Describe the effects of an economy that is below potential
- Measure the size of contractionary gaps
- Explain the impact of an economy that is beyond its potential
- Determine the size of expansionary gaps
- Report how knowing the size of these gaps can help the central bank
These lessons are each accompanied by short multiple-choice quizzes that let you assess what you've learned. Video tags make it easy to go back and review areas that are giving you trouble. Our instructors are experts in the field, and if you need more help, you can contact them.
1. What is a Contractionary Gap? - Identifying an Economy That is Below Potential
In this lesson, you'll discover what a contractionary gap is with a real world example. In addition, you'll learn how economists illustrate it, so you can easily recognize it.
2. Calculating the Size of a Contractionary Gap
Sometimes the economy's actual production is below its potential, and in this lesson, you'll learn how to calculate the gap between the two, something economists call 'a contractionary gap.'
3. What is an Expansionary Gap? - Identifying an Economy That is Above Potential
In this lesson, you'll find out what an expansionary gap is, how economists illustrate it, and how to easily identify an economy that is growing above its long-run potential. In addition, you'll discover the unintended consequence that comes with expansionary gaps.
4. Calculating the Size of an Expansionary Gap
This lesson will teach you how to estimate the size of an expansionary gap by calculating the difference between actual economic output and potential economic output. The task of knowing the size of an expansionary gap is critical for economists and government leaders who want to attempt to eliminate it so they can help smooth out the business cycle.
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Other chapters within the AEPA Economics (AZ035): Practice & Study Guide course
- Economic Concepts & Terms
- Scarcity, Costs & Production in Economics
- Basics of Measuring the Economy
- Scarce Economic Resource Markets Basics
- Supply, Demand & Market Equilibrium
- Price Determination & Elasticity
- Business Interactions with the Marketplace
- Producers & Production in Microeconomics
- Economic Market Structures
- Fiscal & Monetary Policies in Economics
- Economic Governance
- Understanding Macroeconomic Equilibrium
- Inflation & Adjustment in Economics
- Unemployment Basics
- Understanding Inflation & Unemployment
- Overview of Aggregate Demand & Supply
- Understanding Economic Growth and Productivity
- Understanding Comparative Advantage, Specialization & Exchange
- Money & the Market
- The Central Bank & Monetary Policy
- Foreign Exchange & Trade Balance
- Overview of Inflows, Outflows & Restrictions
- Strategies for Economic Analysis
- Consumer Behavior & Microeconomics
- Consumer Buyer Behavior
- Promotion & Public Relations in Marketing
- Consumer Protection Laws & Agencies
- AEPA Economics Flashcards