Use the figure below to answer the following question(s). Figure 10-5
Figure 10-5 indicates that the output of the economy is
A) greater than the economy's long-run capacity.
B) equal to the economy's long-run capacity.
C) less than the economy's long-run capacity.
D) consistent with long-run equilibrium.

Question

Use the figure below to answer the following question(s). Figure 10-5
 Figure 10-5 indicates that the output of the economy is
A) greater than the economy's long-run capacity. 
B) equal to the economy's long-run capacity. 
C) less than the economy's long-run capacity. 
D) consistent with long-run equilibrium.

Quizplus · Accepted Answer

The figure shows that actual output (Y) is below potential output (Y*) at the current price level (P) and unemployment rate (u). This indicates that the economy is operating below its long-run capacity. Therefore, the best choice is C.

Use the Figure Below to Answer the Following Question(s)