Figure 27-5
-Refer to Figure 27-5. In the dynamic model of AD-AS in the figure above, if the economy is at point A in year 1 and is expected to go to point B in year 2, and no fiscal or monetary policy is pursued, then at point B
A) the unemployment rate is very low.
B) firms are operating below capacity.
C) the economy is above full employment.
D) income and profits are definitely rising.
E) there is pressure on wages and prices to rise.

Question

Figure 27-5 
-Refer to Figure 27-5. In the dynamic model of AD-AS in the figure above, if the economy is at point A in year 1 and is expected to go to point B in year 2, and no fiscal or monetary policy is pursued, then at point B
A) the unemployment rate is very low. 
B) firms are operating below capacity. 
C) the economy is above full employment. 
D) income and profits are definitely rising. 
E) there is pressure on wages and prices to rise.

Quizplus · Accepted Answer

In the dynamic AD-AS model, if the economy moves from point A to point B without any policy intervention, it typically indicates that the economy is operating below capacity, leading to higher unemployment and unused resources.

Figure 27-5 -Refer to Figure 27-5. in the Dynamic Model of AD-AS