If the economy is at point A

Question

BlackTom AI · Accepted Answer

To tackle the question, I’ll walk through each option and link it to what the diagram shows about point A.
Option a: it is in a recessionary gap. This choice corresponds to the situation where real GDP is below the natural level of GDP (potential output). In the diagram, point A lies to the left of the full-employment (natural) level, indicating output below potential and thus a recessionary gap. This is a standard interpretation when actual GDP is below the economy’s potential.
Option b: employment is greater than the natural level of employment. This would imply output above potential and a positive output gap, often associated with an overheated economy. The graph shows A below the natural level, not above it, so this statement is inconsistent with A’s position.
Option c: it is at the natural level of employment. If A were at the natural level, it would coincide with potential GDP where the economy is fully utilizing resources. The diagram places A below that level, so this claim misidentifies A’s location on the business-cycle spectrum.
Option d: there is cyclical unemployment. While a recessionary gap does imply higher unemployment due to weak demand, the statement specifically about cyclic unemployment would require more precise labeling about the unemployment components. The graph emphasizes output and employment relative to the natural level rather than naming the unemployment type, so labeling A as cyclical unemployment is less direct.
Option e: the unemployment rate is negative. A negative unemployment rate is impossible in reality; unemployment cannot be below zero. Since A indicates an underperforming economy with below-potential output, the unemployment rate would be positive, not negative. This makes the option factually invalid.

Academic Courses Test#3

If the economy is at point A

View Explanation

Log in for full answers

Similar Questions

The graph below illustrates the effects of monetary policy that shifts the AD curve right. This will result in a in unemployment and a __ in the price level.

Suppose that the economy is in long-run equilibrium at point A. Now suppose net exports increase. What happens in the short run?

At output level Yk,

Figure 33-6 Refer to Figure 33-6. Suppose the economy starts at A. If changes occur that move the economy to a new short-run equilibrium of P1 and Y1 , then it must be the case that

Figure 33-5 Refer to Figure 33-5. Suppose the economy starts at Point Y. If there is a reduction in aggregate demand, then in the long run the economy moves to

Assume this economy is initially producing an output of Y1. As the economy moves from Y1 to Y2 ___.

An increase in the price level ___.

More Practical Tools for Students Powered by AI Study Helper

Homework AI Solver

Stylized AI Paper Writer

Plagiarism Checker Assistant

Citation AI Academic Writing Tool

In-Class Translation Assistant

AI Note Generator

AI Quiz Answers

Past Exam Questions from University Test Bank

Smart Practice Assistant

Adaptive Practice

Making Your Study Simpler

Academic Courses Test#3

If the economy is at point A

View Explanation

Log in for full answers

Similar Questions

The graph below illustrates the effects of monetary policy that shifts the AD curve right. This will result in a __________ in unemployment and a ____________ in the price level.

Suppose that the economy is in long-run equilibrium at point A. Now suppose net exports increase. What happens in the short run?

At output level Yk,

Figure 33-6 ​ Refer to Figure 33-6. Suppose the economy starts at A. If changes occur that move the economy to a new short-run equilibrium of P1 and Y1 , then it must be the case that

Figure 33-5 ​ Refer to Figure 33-5. Suppose the economy starts at Point Y. If there is a reduction in aggregate demand, then in the long run the economy moves to

Assume this economy is initially producing an output of Y1. As the economy moves from Y1 to Y2 ___.

An increase in the price level ___.

More Practical Tools for Students Powered by AI Study Helper

Making Your Study Simpler

The graph below illustrates the effects of monetary policy that shifts the AD curve right. This will result in a in unemployment and a __ in the price level.

Figure 33-6 Refer to Figure 33-6. Suppose the economy starts at A. If changes occur that move the economy to a new short-run equilibrium of P1 and Y1 , then it must be the case that

Figure 33-5 Refer to Figure 33-5. Suppose the economy starts at Point Y. If there is a reduction in aggregate demand, then in the long run the economy moves to