**Economic Short-Run Equilibrium Analysis****Question:**Refer to the figure below. Which of the points in the above graph are possible short-run equilibria?- O A and B- O A and C- O A and D- O A, B, C, and D**Graph Explanation:**The graph illustrates the interaction between aggregate demand and aggregate supply in the context of short-run economic equilibrium. The following components are displayed:- **Price Level (GDP Deflator, 2000 = 100):** This is represented on the vertical axis, indicating changes in the overall level of prices in the economy.- **Real GDP (Trillions of 2000 Dollars):** Shown on the horizontal axis, this measures the output of goods and services produced in the economy, adjusted for inflation to the year 2000.- **Curves:** - **LRAS (Long-Run Aggregate Supply):** A vertical line indicating the economy's potential output when resources are fully employed. - **SRAS₁ and SRAS₂ (Short-Run Aggregate Supply Curves):** These upward sloping lines reflect how output responds to changes in the price level in the short run. - **AD₁ and AD₂ (Aggregate Demand Curves):** These downward sloping lines show the total demand for goods and services at varying price levels.**Points of Intersection:**- **Point A:** The intersection of SRAS₁ and AD₁.- **Point B:** The intersection of LRAS and AD₁.- **Point C:** The intersection of LRAS and AD₂.- **Point D:** The intersection of SRAS₂ and AD₂.**Possible Short-Run Equilibria:**The potential points of short-run equilibrium are points where the SRAS curves intersect the AD curves. Based on the graph, these points would be:- **Point A (SRAS₁ intersects AD₁)**- **Point D (SRAS₂ intersects AD₂)**Therefore, the correct answer is **A and D**.

Short-run equilibrium occurs when the quantity of goods and services demanded equals the quantity…

Refer to the figure below. Which of the points in the above graph are possible short-run equilibria? Price level (GDP deflator, 2000-100) O A and B O A and C O A and D O A, B, C, and D LRAS SRAS, SRAS AD₂ AD₁ Real GDP (trillions of 2000 dollars)

Refer to the figure below. Which of the points in the above graph are possible short-run equilibria? Price level (GDP deflator, 2000-100) O A and B O A and C O A and D O A, B, C, and D LRAS SRAS, SRAS AD₂ AD₁ Real GDP (trillions of 2000 dollars)

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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