FIGURE 24-2
-Refer to Figure 24-2. If the economy is currently in a short-run equilibrium at Y1, the economy is experiencing
A) potential output growth.
B) a long-run equilibrium.
C) an excess supply of labour.
D) an inflationary output gap.
E) a recessionary output gap.

Question

FIGURE 24-2
-Refer to Figure 24-2. If the economy is currently in a short-run equilibrium at Y1, the economy is experiencing
A) potential output growth. 
B) a long-run equilibrium. 
C) an excess supply of labour. 
D) an inflationary output gap. 
E) a recessionary output gap.

Quizplus · Accepted Answer

If the economy is in short-run equilibrium at Y1 and Y1 is greater than the potential output, it indicates an inflationary output gap, where actual output exceeds potential output, leading to upward pressure on prices.

FIGURE 24-2 -Refer to Figure 24-2. If the Economy Is Currently in Currently