Refer to the information provided in Figure 11.8 below to answer the questions that follow. Figure 11.8 -Refer to Figure 11.8. If the economy is currently at Point D producing output level Y₂, which of the following is not true? A) The economy is operating below full employment. B) Input prices are likely to fall. C) Aggregate supply shifts to the right and the economy ends up at Point E. D) The economy is operating above full employment.

Question

Quizplus · Accepted Answer

Point D is located to the right of the long-run aggregate supply (LRAS) curve indicating the economy is operating above full employment. Therefore, statement D is not true. Option A is true as the actual output level is less than the potential output level, which denotes that the economy is operating below full employment. Option B is false as lower input prices would shift the short-run aggregate supply (SRAS) curve to the right and move the economy along the LRAS curve towards point E. Option C is true as the aggregate supply shifts to the right and the economy moves from point D to point E with the same price level and higher output level.

Refer to the Information Provided in Figure 11