Exhibit 10.2

-Refer to Exhibit 10.2, which shows the short-run aggregate supply curve of an economy. In this Exhibit, the distance between Y₁ and Y₂ represents _____
A) an expansionary gap.
B) a recessionary gap.
C) cost-push inflation.
D) the natural rate of unemployment.
E) the full-employment output.

Question

Exhibit 10.2
 
-Refer to Exhibit 10.2, which shows the short-run aggregate supply curve of an economy. In this Exhibit, the distance between Y₁ and Y₂ represents _____
A) an expansionary gap. 
B) a recessionary gap. 
C) cost-push inflation. 
D) the natural rate of unemployment. 
E) the full-employment output.

Quizplus · Accepted Answer

The distance between Y₁ and Y₂ in the context of an aggregate supply curve represents an expansionary gap, which occurs when the actual output exceeds the potential output, leading to upward pressure on prices and wages.

Exhibit 10.2 -Refer to Exhibit 10.2, Which Shows the Short-Run Aggregate Supply