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

question 50

Multiple Choice

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.