At a trough in the business cycle,the macroeconomic equilibrium is ________ the level of potential real GDP.
A)equal to
B)rising above
C)less than
D)greater than
E)None of the above answers is always correct because the relationship depends on whether the previous phase of the business cycle had been a recession or an expansion.

Question

Quizplus · Accepted Answer

During a trough in the business cycle, the level of macroeconomic equilibrium is generally less than the level of potential real GDP. This is because there is a high level of unemployment and unused capacity in the economy, leading to a shortfall in aggregate demand relative to potential output.

At a Trough in the Business Cycle,the Macroeconomic Equilibrium Is