Figure 12-2
-Refer to Figure 12-2.Suppose that the level of GDP associated with point N is potential GDP.If the U.S.economy is currently at point K,then
A)firms are operating above capacity.
B)the economy is at full employment.
C)the economy is in recession.
D)the level of unemployment is equal to the natural rate.

Question

Figure 12-2 
-Refer to Figure 12-2.Suppose that the level of GDP associated with point N is potential GDP.If the U.S.economy is currently at point K,then
A)firms are operating above capacity. 
B)the economy is at full employment. 
C)the economy is in recession. 
D)the level of unemployment is equal to the natural rate.

Quizplus · Accepted Answer

Point K is below potential GDP, which indicates that the economy is operating at a level below its full capacity. This is a characteristic of a recession, which is typically associated with high unemployment and idle resources. Therefore, the correct answer is C, the economy is in recession.

Figure 12-2 -Refer to Figure 12-2.Suppose That the Level of GDP Associated