Business Finance
Aggregate Demand and Aggregate Supply

Question Description

Analyze why the economy may operate below full-employment GDP in the short run. How can the multiplier have a negative effect? ORIGINAL REQ 

Final Answer

The difference between real GDP and Current GDP is what constitute the difference in long-run and short-run GDP. in the short-run the resources that are not being fully utilized by the economy hence current gross domestic product is lower than that observed in the long-run.

 A multiplier is an element of proportionality that elaborates the change commissioned by an endogenous variable on another exogenous variable. a money multiplier will be affected negatively if the central bank increase the commercial banks' borrowing rates the money supply in the economy will go down.


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