The Figure Below Shows the Equilibrium in an Aggregate Demand-Aggregate

question 107

Multiple Choice

The figure below shows the equilibrium in an aggregate demand-aggregate supply model. In this figure, which of the following is true for an economy that is at point V in the short run?

• A) There is a recessionary gap worth $200 billion.
• B) The potential output is $7 trillion.
• C) The actual price level is 100.
• D) The natural rate of unemployment is more than 6.8 trillion.
• E) The actual output is equal to the potential output.

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Definitions:

Mechanistic Hypothesis

The hypothesis that share prices respond mechanistically to changes in accounting numbers, ignoring the effects of accounting policies.

Capital Markets

Financial markets where long-term debt or equity-backed securities are bought and sold, assisting in raising capital.

Accounting Policies

Unique theories, platforms, systems, edicts, and maneuvers practiced by an organization in the creation and issuance of its financial testimonies.

Political Cost Hypothesis

A theory suggesting that larger firms are more likely to be subject to government scrutiny and regulation, thus incurring additional costs to comply with political expectations.