-Refer to Figure 11-8.If Y_FE represents the full-employment level of output,what can we say about the state of the economy at Y₁? A) It is in equilibrium,but below full employment. B) It is in equilibrium,and therefore at full employment. C) It is in equilibrium,but above full employment. D) It is not in equilibrium,and output will increase. E) It is not in equilibrium,and output will fall.

Question

Quizplus · Accepted Answer

Given that Y_FE represents the full-employment level of output, if the economy is at Y₁, it implies that the economy is producing less than its full-employment output. Therefore, it is in equilibrium but below full employment.