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If Actual Real GDP Is Greater Than the Equilibrium Level

question 18

Essay

If actual real GDP is greater than the equilibrium level of real GDP (i.e., the aggregate expenditures function is below the 45-degree line), what happens to restore equilibrium to the economy?


Definitions:

Price

The fee anticipated, needed, or handed over as payment for a service or product.

Average Cost Price

The mean cost per unit of production, calculated by dividing total costs by total output.

Price

The amount of money required to purchase a good or service, reflecting its value in the marketplace.

Deadweight Loss

A loss of economic efficiency that can occur when the equilibrium for a good or a service is not achieved or is not achievable.

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