FIGURE 24-1 Refer to Figure 24-1.If the economy is currently in a short-run equilibrium at Y₀,the economy is experiencing A)an inflationary output gap. B)a labour shortage. C)a long-run equilibrium. D)a recessionary output gap. E)potential output growth.

Question

Quizplus · Accepted Answer

The economy is currently producing below its potential output (YS1 is less than YP). This means there is unemployment and resources are not being used efficiently. This is a recessionary output gap.