The graph shown displays various price and output levels in an economy. If the economy is currently at point E₃, it must be in: A) long-run equilibrium. B) a recession. C) an economic expansion. D) an economic recovery.

Question

Quizplus · Accepted Answer

At point E₃, the economy is producing at the potential output level represented by the long-run aggregate supply. The price level and output level are both stable, indicating that the economy is in long-run equilibrium.

The Graph Shown Displays Various Price and Output Levels in an Economy