Use the following to answer questions:
Figure: AD-AS Model I
-(Figure: AD-AS Model I) Refer to Figure: AD-AS Model I. If the economy is at point X, there is a(n) _____ gap with _____ unemployment.
A) inflationary; low
B) inflationary; high
C) recessionary; low
D) recessionary; high

Question

Use the following to answer questions:
Figure: AD-AS Model I 
-(Figure: AD-AS Model I) Refer to Figure: AD-AS Model I. If the economy is at point X, there is a(n) _____ gap with _____ unemployment.
A) inflationary; low 
B) inflationary; high 
C) recessionary; low 
D) recessionary; high

Quizplus · Accepted Answer

Point X is to the left of the long-run equilibrium, indicating a recessionary gap. At point X, the economy is producing less than its potential level of output, leading to high unemployment.

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