About This Chapter
Expansionary & Contractionary Gaps - Chapter Summary
Take a peek at this chapter and get reacquainted with how expansionary and contractionary gaps occur. Our instructors have built these lessons to teach you about real-time measurements of the GDP versus projections of where economists believe it should be. Gaps are created when differences exist between these two variables, as our instructors will elaborate on.
As you go through the information, you will uncover why such gaps can be beneficial or detrimental to the economy. Likewise, you will review how various factors relate to the creation of these gaps. Upon completing this chapter, you should possess a fuller comprehension of the following:
- Characteristics of contractionary gaps
- Variables that lead to contractionary gaps
- Expansionary gaps defined
- Reasons that cause expansionary gaps
- Gap calculation procedures
- Methods to visually show the gaps
- The relationship between the gaps and the central bank
- How the gaps impact the economy
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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 GACE Economics (538): Practice & Study Guide course
- Basic Economic Concepts & Terms
- Scarcity, Choice & The Production Possibilities Curve
- Comparative & Absolute Advantage, Specialization & Trade
- Supply, Demand & Market Equilibrium
- Determining Price in Economics
- Government Issues in Economics
- Business Organization & Decision Making
- Producers & Production in Microeconomics
- Understanding Macroeconomic Equilibrium
- Scarce Economic Resource Markets Basics
- Economic Market Structures
- Basics of Measuring the Economy
- Understanding Economic Growth and Productivity
- Inflation & Adjustment in Economics
- Unemployment Basics
- Understanding Inflation & Unemployment
- Overview of Aggregate Demand & Supply
- Fiscal Policy & Monetary Policy
- Money & the Market
- The Central Bank & Monetary Policy
- Foreign Exchange & Trade Balance
- Overview of Inflows, Outflows & Restrictions
- Personal Finance: Consumer Decision Making
- Personal Finance: Savings & Investments
- GACE Economics Flashcards