FIGURE 24-1 -Refer to Figure 24-1.If the economy is currently in a short-run equilibrium at Y₀,the economy is experiencing A)a recessionary output gap. B)an inflationary output gap. C)a labour shortage. D)a long-run equilibrium. E)potential output growth.

Question

Quizplus · Accepted Answer

An economy is said to be experiencing a recessionary output gap when actual output (YS1U1B) is less than potential output (YP). In this case, the short-run equilibrium is below the long-run aggregate supply curve (S1) indicating that the economy is not producing at its full capacity.

FIGURE 24-1 -Refer to Figure 24-1.If the Economy Is Currently in a in a Short-Run