Exhibit 16-5 -If the Economy Pictured in Exhibit 16-5 Is in Equilibrium

Exhibit 16-5
-If the economy pictured in Exhibit 16-5 is in equilibrium where AD = SRAS, then it

A) is experiencing a contractionary gap
B) will experience an increase in the price level if no government action is taken
C) is operating at the potential level of output
D) will experience a stable price level if no government action is taken
E) is operating at less than the economy's potential level of output