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Table 3-39
Assume that Japan and Korea can switch between producing cars and producing airplanes at a constant rate.
-Refer to Table 3-39. Korea should specialize in the production of
Recessionary Gap
The difference between the actual output of an economy and its potential output, occurring when the economy is underperforming.
Expansionary Gap
A situation where the actual output in an economy exceeds the potential output, often leading to inflation.
Cost-Push Inflation
Cost-push inflation is caused by an increase in the prices of production inputs like labour and raw materials, leading to decreased supply and increased cost of finished goods.
Potential Output
This refers to the maximum output an economy can produce without leading to inflation, assuming all resources are fully utilized.
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