Figure 14.4
-Suppose that in Figure 14.4,the level of GDP associated with point N is potential GDP.If the Australian economy is currently at point K

Question

Figure 14.4 
-Suppose that in Figure 14.4,the level of GDP associated with point N is potential GDP.If the Australian economy is currently at point K

Quizplus · Accepted Answer

Point K is below potential GDP, which means the economy is producing output below its maximum capacity. Therefore, the economy is in equilibrium but below full employment. There is still room for expansion and growth, meaning some people are unemployed or underemployed, suggesting that the economy is not at full employment. Since there is no information given about firms operating above capacity or the level of unemployment being equal to the natural rate, options A and D can be ruled out.

Figure 14.4 -Suppose That in Figure 14.4,the Level of GDP Associated with GDP