Solved: Refer to the graph for Questions 4 and 5. Which of the following statements is

Chapter 0, Problem 4

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QUESTION:

Refer to the graph for Questions 4 and 5. Which of the following statements is true if thiseconomy is operating at P1 and Y1?I. The level of aggregate output equals potentialoutput.II. It is in short-run macroeconomic equilibrium.III. It is in long-run macroeconomic equilibrium.a. I onlyb. II onlyc. III onlyd. II and IIIe. I and III

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QUESTION:

Refer to the graph for Questions 4 and 5. Which of the following statements is true if thiseconomy is operating at P1 and Y1?I. The level of aggregate output equals potentialoutput.II. It is in short-run macroeconomic equilibrium.III. It is in long-run macroeconomic equilibrium.a. I onlyb. II onlyc. III onlyd. II and IIIe. I and III

ANSWER:

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The short-run equilibrium occurs where the short-run aggregate supply curve and the short-run aggregate demand curve meets. In the long run, the equilibrium occurs where the short-run aggregate demand and short-run aggregate supply curve meet the long-run aggregate supply curve, which is horizontal, representing full employment.

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