FIGURE 24-2 Refer to Figure 24-2.If the economy is currently in a short-run equilibrium at ,the economy is experiencing

Name: FIGURE 24-2 Refer to Figure 24-2.If the economy is currently in a short-run equilibrium at ,the economy is experiencing
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Question

FIGURE 24-2 Refer to Figure 24-2.If the economy is currently in a short-run equilibrium at  ,the economy is experiencing

Quizplus · Accepted Answer

The economy is currently producing at a level above potential output (the vertical line), which means it is in an inflationary output gap. This gap will eventually lead to an increase in prices, pushing the economy towards a long-run equilibrium.