Exhibit 14A-2 Macro AD-AS Model In Exhibit 14A-2, the short-run equilibrium depicts an economy:
A) with an inflationary gap.
B) with a recessionary gap.
C) producing at full employment.
D) None of the above answers are correct.

Question

Exhibit 14A-2  Macro AD-AS Model  In Exhibit 14A-2, the short-run equilibrium depicts an economy:
A) with an inflationary gap. 
B) with a recessionary gap. 
C) producing at full employment. 
D) None of the above answers are correct.

Quizplus · Accepted Answer

The short-run equilibrium is depicted below the full employment level of output, indicating a recessionary gap where the economy is producing below its potential output.

Exhibit 14A-2 Macro AD-AS Model in Exhibit 14A-2, the Short-Run