In Figure 10.1,suppose this economy is in equilibrium at point a and Q_F represents full employment output.Which of the following statements is true?

Question

Quizplus · Accepted Answer

In equilibrium at point a, the economy is producing output equal to Q_F, which represents full employment output. This means there is no GDP gap, as the economy is producing at its potential. Option A is incorrect because there is no indication of inflation problems as the economy is already producing at full employment output. Option C is incorrect because in equilibrium, inventories are neither accumulating nor falling.