Refer to the information provided in Figure 11.1 below to answer the questions that follow. Figure 11.1
-Refer to Figure 11.1. At aggregate output levels below $500 billion, this economy is most likely experiencing
A) rapid increases in the growth rate of the money supply.
B) a boom.
C) excess demand.
D) excess capacity.

Question

Refer to the information provided in Figure 11.1 below to answer the questions that follow.  Figure 11.1
-Refer to Figure 11.1. At aggregate output levels below $500 billion, this economy is most likely experiencing
A) rapid increases in the growth rate of the money supply. 
B) a boom. 
C) excess demand. 
D) excess capacity.

Quizplus · Accepted Answer

At aggregate output levels below $500 billion, there is excess capacity in the economy, which means that firms are producing at a level below their potential output. This implies that there is spare capacity in the economy, and therefore excess supply rather than excess demand. Rapid increases in the growth rate of the money supply or a boom would typically be associated with higher aggregate output levels, as aggregate demand increases.

Refer to the Information Provided in Figure 11