Figure 16-3

question 114

Multiple Choice

Figure 16-3
Panel (a) Panel (b) Suppose the level of potential output (Y_P) is $1,000 billion and the natural rate of unemployment is 5%. In Panel (a) , the aggregate demand curve in Period 1 is AD₁. Assume that the price level in Period 1 has risen by 1.5% from the previous period and the unemployment rate is 10%. Thus, in Panel (b) point F shows an initial rate of inflation of 1.5% and an unemployment rate of 10%. Similarly, point b in Panel (a) corresponds to point G in Panel (b) and point d in Panel (a) corresponds to point H in Panel (b) .
-Refer to Figure 16-3. If the economy were experiencing a recessionary gap, it would be Joperating at

• A) point a only.
• B) point b only.
• C) either point a or point b.
• D) point d only.

---

Definitions:

Direct Funding

Direct funding refers to the allocation of financial resources directly to a specific project, program, or organization without intermediaries.

Organization

An entity, such as a company, government body or nonprofit, composed of individuals working together to achieve common goals or perform specific functions.

Reimbursement Basis

A payment method where expenses are paid back after they have been incurred, often used in contracts and employment agreements.

Contracted Work

Work undertaken by a person or company based on a contractual agreement with another party, typically specifying the work to be done, timeline, and payment.