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The Figure Below Shows the Relationship Between an Economy's Potential

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The figure below shows the relationship between an economy's potential output,price level,and real GDP.According to those who favor a passive approach to policy,the economy will attain equilibrium at potential output when: ​
Figure 16.1​

The figure below shows the relationship between an economy's potential output,price level,and real GDP.According to those who favor a passive approach to policy,the economy will attain equilibrium at potential output when: ​ Figure 16.1​ ​   A) the short-run aggregate supply curve shifts to the left. B) the short-run aggregate supply curve shifts to the right due to a fall in real wages. C) either the money supply or government spending is increased. D) either the money supply or government spending is decreased. E) aggregate demand is decreased.


Definitions:

Quantity Demanded

The amount (number of units) of a product that a household would buy in a given period if it could buy all it wanted at the current market price.

Breaks Even

Achieves a situation where there is no profit or loss, synonymous with the concept of the break-even point but phrased differently.

Perfectly Competitive

Describes a market structure where no single buyer or seller has market power, products are homogeneous, information is freely available, and there is free entry and exit of firms.

Market Demand Curve

A graphical representation of the quantity demanded at various prices by all consumers in the market.

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