Exhibit 10.1

-Refer to Exhibit 10.1, which shows the short-run aggregate supply (SRAS) curve of an economy. To the left of Y₁, _____
A) output levels are at the economy's potential.
B) output levels are more than the economy's potential.
C) output levels are less than the economy's potential.
D) unemployment is at the natural rate.
E) unemployment is lower than the natural rate.

Question

Exhibit 10.1
 
-Refer to Exhibit 10.1, which shows the short-run aggregate supply (SRAS) curve of an economy. To the left of Y₁, _____
A) output levels are at the economy's potential. 
B) output levels are more than the economy's potential. 
C) output levels are less than the economy's potential. 
D) unemployment is at the natural rate. 
E) unemployment is lower than the natural rate.

Quizplus · Accepted Answer

To the left of Y₁, output levels are less than the economy's potential, as the SRAS curve is upward sloping and the equilibrium level of output is to the right of Y₁. This indicates that there is slack in the economy and unused resources, leading to lower output levels.

Exhibit 10.1 -Refer to Exhibit 10.1, Which Shows the Short-Run Aggregate Supply