Use the following to answer questions .
Exhibit: Monetary Policy and Long-Run Aggregate Demand and Aggregate Supply
-(Exhibit: Monetary Policy and Long-Run Aggregate Demand and Aggregate Supply) If the economy is at point c,
A) it is in a recessionary gap.
B) it is at natural level of employment.
C) the level of employment is greater than the natural level of employment.
D) the unemployment rate is negative.

Question

Use the following to answer questions .
Exhibit: Monetary Policy and Long-Run Aggregate Demand and Aggregate Supply 
-(Exhibit: Monetary Policy and Long-Run Aggregate Demand and Aggregate Supply) If the economy is at point c,
A) it is in a recessionary gap. 
B) it is at natural level of employment. 
C) the level of employment is greater than the natural level of employment. 
D) the unemployment rate is negative.

Quizplus · Accepted Answer

The economy is at a recessionary gap when the actual output is below the potential output. At point c, the actual output (Y1) is below the potential output (Yf), indicating a recessionary gap.

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