FIGURE 24-2
-Refer to Figure 24-2.If the economy is currently in a short-run equilibrium at ,the economy is experiencing
A)potential output growth.
B)a long-run equilibrium.
C)an excess supply of labour.
D)an inflationary output gap.
E)a recessionary output gap.

Question

FIGURE 24-2
-Refer to Figure 24-2.If the economy is currently in a short-run equilibrium at  ,the economy is experiencing
A)potential output growth. 
B)a long-run equilibrium. 
C)an excess supply of labour. 
D)an inflationary output gap. 
E)a recessionary output gap.

Quizplus · Accepted Answer

The short-run equilibrium is above the economy's potential output, indicating high demand and possibly high prices. This suggests an inflationary output gap, where there is pressure for prices to rise in the long run as the economy moves back towards potential output. Therefore, the correct answer is D.

FIGURE 24-2 -Refer to Figure 24-2.If the Economy Is Currently in a in a Short-Run