Figure 15-12Price levelLRAS, LRAS₂B*$10104100ThrAD₁11 11.3SRAS,SRAS₂AD₂Real GDPRefer to Figure 15-12. In the dynamic AD-AS model, if theeconomy is at point A in year 1 and is expected to go topoint B in year 2, and the Federal Reserve pursues no policy,then at point B A firms are producing above capacity.BсDthere is pressure on wages and prices to fall.the unemployment rate is greater than thenatural rate of unemployment.incomes and profits are falling.

Productive capacity is the maximum possible outcome a economy can produce from its resources and…

Answered: 104 100 LRAS, A LRAS₂ B SRAS, SRA AD,

Business

Economics

104 100 LRAS, A LRAS₂ B SRAS, SRA AD,

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?

Section: Chapter Questions

Problem 3TY

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Question

Figure 15-12
Price level
LRAS, LRAS₂
B
*
$10
104
100
Thr
AD₁
11 11.3
SRAS,
SRAS₂
AD₂
Real GDP
Refer to Figure 15-12. In the dynamic AD-AS model, if the
economy is at point A in year 1 and is expected to go to
point B in year 2, and the Federal Reserve pursues no policy,
then at point B

A firms are producing above capacity.
B
с
D
there is pressure on wages and prices to fall.
the unemployment rate is greater than the
natural rate of unemployment.
incomes and profits are falling.

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