Use the Following to Answer Questions

question 161

Multiple Choice

Use the following to answer questions:
Figure: AD-AS Model I
-(Figure: AD-AS Model I) Refer to Figure: AD-AS Model I. If the economy is at point X, there is a(n) _____ gap with _____ unemployment.

• A) inflationary; low
• B) inflationary; high
• C) recessionary; low
• D) recessionary; high

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Definitions:

Demand Occurs

The moment at which consumers are willing and able to purchase a good or service at a given price.

Long-Run Equilibrium

A state in which all factors of production and costs are variable, and firms in the industry are earning only normal profits, with no incentive for entry or exit.

Inferior Good

A good or service whose consumption declines as income rises, prices held constant.

Constant Costs

Costs that remain unchanged regardless of the level of production or activity.