Exhibit 10-2 -If the actual price level in Exhibit 10-2 exceeds the expected price level,then A)equilibrium output might be Y₂ in the short run B)equilibrium output might be Y₁ in the short run C)equilibrium output might be Y₃ in the short run D)potential output is greater than actual output E)unemployment is above the natural rate

Question

Quizplus · Accepted Answer

According to the Exhibit 10-2, if the actual price level exceeds the expected price level, the short-run equilibrium output will shift from YP to the left. In this case, the new short-run equilibrium output will be YS1, which is lower than YP. Among the given options, option C (Y₃) is the closest to this new equilibrium output level. Therefore, the correct choice is (C).

Exhibit 10-2 -If the Actual Price Level in Exhibit 10-2 Exceeds the 10-2