Figure 15-3

-Refer to Figure 15-3.Which of the points in the above graph are possible short-run equilibria but not long-run equilibria? Assume that Y₁ represents potential GDP.
A) A and B
B) A and C
C) C and D
D) B and D

Question

Figure 15-3
 
-Refer to Figure 15-3.Which of the points in the above graph are possible short-run equilibria but not long-run equilibria? Assume that Y₁ represents potential GDP.
A) A and B 
B) A and C 
C) C and D 
D) B and D

Quizplus · Accepted Answer

In the short run, the economy can be at an equilibrium where actual GDP is different from potential GDP (Y₁). Points B and D represent such short-run equilibria where the economy is not at potential GDP, thus they are not long-run equilibria.

Figure 15-3 -Refer to Figure 15-3.Which of the Points in the Above