The figure below shows the price level, real GDP, and the potential output for an economy. According to those who favor an active approach to policy, once the expansionary gap is eliminated, the economy can attain equilibrium at:

A) point A.
B) point B.
C) point C.
D) a point above point A on the SRAS curve.
E) at a point below point C on the SRAS curve.

Question

The figure below shows the price level, real GDP, and the potential output for an economy. According to those who favor an active approach to policy, once the expansionary gap is eliminated, the economy can attain equilibrium at:

A) point A. 
B) point B. 
C) point C. 
D) a point above point A on the SRAS curve. 
E) at a point below point C on the SRAS curve.

Quizplus · Accepted Answer

The Answer of The figure below shows the price level, real GDP, and the potential output for an economy. According to those who favor an active approach to policy, once the expansionary gap is eliminated, the economy can attain equilibrium at:

A) point A. 
B) point B. 
C) point C. 
D) a point above point A on the SRAS curve. 
E) at a point below point C on the SRAS curve.

The Figure Below Shows the Price Level, Real GDP, and the Potential