Step 2: Two PPFSConsider the following scenario: The economy is in long-run equilibrium, as short-run equilibrium output is equal to the Natural Real GDP of $6trillion.The following graph shows two production possibilities frontiers (PPFS) for the economy. The PPF closer to the origin (blue curve) is the economy'sinstitutional PPF, and the PPF farther from the origin (purple curve) is the economy's physical PPF.Place the grey point (star symbol) on one of the black points (plus symbol) to indicate the state of the economy when it is operating at the short-run equilibrium described above.ALL OTHER GOODS (Thousands of units)109w0Physical PPF0 1FInstitutional PPF2+Two PPFs+ED+00B3 4 5 6 7GOOD X (Thousands of units)In time, wages and costs of production will likely8910State of Economy? Step 1: States of the EconomyThe following graph shows the aggregate demand curve (AD), the short-run aggregate supply curve (SRAS), and the long-run aggregate supplycurve (LRAS) of an economy.PRICE LEVEL200180160140120100808604020001Step 2: Two PPFsADReal GDP and Natural Real GDPSRAS2LRAS345 6 7REAL GDP (Trillions of dollars)The short-run equilibrium output level is $6 trillion89 10(?), and the economy is operatingexists in the labor market of this economy.Consider the following scenario: The economy is in long-run equilibrium as short-run sailAs a result,with an inflationary gapwith a recessionary gapin a long-run equilibrium the Natural Real GDP of $6

The level of production produced by enterprises and the price level over the long term are related…

Answered: The short-run equilibrium output level…

The short-run equilibrium output level is $6 trillion exists in the labor market of this economy. , and the economy is operating with an inflationary gap . As a result,

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter7: Production And Growth

Section: Chapter Questions

Problem 5CQQ

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Question

Step 2: Two PPFS
Consider the following scenario: The economy is in long-run equilibrium, as short-run equilibrium output is equal to the Natural Real GDP of $6
trillion.
The following graph shows two production possibilities frontiers (PPFS) for the economy. The PPF closer to the origin (blue curve) is the economy's
institutional PPF, and the PPF farther from the origin (purple curve) is the economy's physical PPF.
Place the grey point (star symbol) on one of the black points (plus symbol) to indicate the state of the economy when it is operating at the short-
run equilibrium described above.
ALL OTHER GOODS (Thousands of units)
10
9
w
0
Physical PPF
0 1
F
Institutional PPF
2
+
Two PPFs
+
E
D
+
00
B
3 4 5 6 7
GOOD X (Thousands of units)
In time, wages and costs of production will likely
8
9
10
State of Economy
?

Step 1: States of the Economy
The following graph shows the aggregate demand curve (AD), the short-run aggregate supply curve (SRAS), and the long-run aggregate supply
curve (LRAS) of an economy.
PRICE LEVEL
200
180
160
140
120
100
80
8
60
40
20
0
0
1
Step 2: Two PPFs
AD
Real GDP and Natural Real GDP
SRAS
2
LRAS
3
4
5 6 7
REAL GDP (Trillions of dollars)
The short-run equilibrium output level is $6 trillion
8
9 10
(?)
, and the economy is operating
exists in the labor market of this economy.
Consider the following scenario: The economy is in long-run equilibrium as short-run sail
As a result,
with an inflationary gap
with a recessionary gap
in a long-run equilibrium the Natural Real GDP of $6

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