Consider the following table and identify equilibrium GDP. If the potential GDP is at 12.0, what can you conclude about price levels and the unemployment rate? Current Price Level Real GDP-quantity demanded per trillion Real GDP-quantity supplied per trillion 6.0 10.0 120 115 110 100 8.0 11.0 13.0 8.0 6.0 5.0 The economy has high unemployment but experiences stable price levels because the economy operates below the potential GDP O The economy has stable price levels and low unemployment because it is operating above the potential GDP. O The economy is experiencing rising price levels and has a low unemployment rate because it is operating above the potential GDP.

Consider the following table and identify equilibrium GDP. If the potential GDP is at 12.0, what can you conclude about price levels and the unemployment rate? Current Price Level Real GDP-quantity demanded per trillion Real GDP-quantity supplied per trillion 6.0 10.0 120 115 110 100 8.0 11.0 13.0 8.0 6.0 5.0 The economy has high unemployment but experiences stable price levels because the economy operates below the potential GDP O The economy has stable price levels and low unemployment because it is operating above the potential GDP. O The economy is experiencing rising price levels and has a low unemployment rate because it is operating above the potential GDP.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Price level (GDP price Index 2012-100) Pocential AS 130 GDP 120 110 100 90 AD 19.0 195 20.0 20.5 21.0 21.5 Real GDP (trillons of 2012 dollars) In the figure above, the economy is at an equilibrium with real GDP of $20 trillion and a price level of 110. As the economy moves toward its ultimate equilibrium, the curve shifts because O a. aggregate supply; leftward; the money wage rate rises O b. aggregate supply; rightward; the money wage rate falls O c. aggregate demand; leftward; the money wage rate rises d. potential GDP; leftward; the money wage rate falls O e. aggregate demand; rightward; the money wage rate falls
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