Exhibit 10.1

-Refer to Exhibit 10.1, which shows the short-run aggregate supply (SRAS) curve of an economy. To the right of Y₁, _____
A) output levels are at the economy's potential.
B) output levels are more than the economy's potential.
C) output levels are less than the economy's potential.
D) unemployment is at the natural rate.
E) unemployment is higher than the natural rate.

Question

Exhibit 10.1
 
-Refer to Exhibit 10.1, which shows the short-run aggregate supply (SRAS) curve of an economy. To the right of Y₁, _____
A) output levels are at the economy's potential. 
B) output levels are more than the economy's potential. 
C) output levels are less than the economy's potential. 
D) unemployment is at the natural rate. 
E) unemployment is higher than the natural rate.

Quizplus · Accepted Answer

To the right of Y₁, output levels are more than the economy's potential as the SRAS curve becomes relatively flat, meaning that increases in output can be achieved at relatively low levels of inflation. This implies that the economy is producing beyond its potential output level, which leads to increasing price levels.

Exhibit 10.1 -Refer to Exhibit 10.1, Which Shows the Short-Run Aggregate Supply