inflationary & deflationary gaps (1 Viewer)

[me]

inflationary & deflationary gaps... have u guys learnt about these and how to close them?

 

[sif not 99]

yep u need an explanation tho?

 

[me]

not sure

i'll look over them again 2day, but it's gotta do with fiscal policy and decreasing/increasing govt.spending to alter eco activity rite?

 

[Bambul]

I learnt about them in year 12 but I very much doubt your need to know about them. Just know that the government uses contractionary fiscal/monetary policy when the economy is overheating and expansionary fiscal/monetary policy when the economy is in a downturn. Then give examples (eg. recession, government spends more on infrastructure, automatic stabilizers kick in and the RBA recues interest rates).