Refer to the following figure when answering the following questions.
Figure 12.4: Phillips Curve
-Consider the Phillips curve in Figure 12.4. At point b, the economy is ________, and at point a, the economy is ________.
A) in recession; booming
B) in recession; in its long-run equilibrium
C) in recession; in recession
D) booming; in recession
E) in its long-run equilibrium; in recession

Question

Refer to the following figure when answering the following questions.
Figure 12.4: Phillips Curve 
-Consider the Phillips curve in Figure 12.4. At point b, the economy is ________, and at point a, the economy is ________.
A) in recession; booming 
B) in recession; in its long-run equilibrium 
C) in recession; in recession 
D) booming; in recession 
E) in its long-run equilibrium; in recession

Quizplus · Accepted Answer

At point b, the economy is booming because it is at a point where unemployment is lower than its natural rate, indicating an overheated economy. At point a, the economy is in recession, as it is at a point where unemployment is higher than its natural rate, indicating an economic downturn.

Refer to the Following Figure When Answering the Following Questions