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UI Post-UTME Economics 2019 (Model questions) Question 19

Question 19

National Income

Use the diagram (AS and AD against income, with equilibrium at E and angles X and K) to answer this question. The deflationary gap is defined by

Diagram for this question
  1. A.K
  2. B.X + K
  3. C.X − K
  4. D.X
Show the answer and explanation

Answer: A (K)

Explanation

Beyond E aggregate supply is above aggregate demand; that excess, marked K, is the deflationary gap.