Exhibit 10A-3 Macro AD-AS Model

In Exhibit 10A-3, the level of real GDP represented by Yp:
A) is potential real GDP for this economy.
B) indicates that the economy is experiencing zero inflation.
C) indicates that the economy is experiencing a recessionary gap.
D) would be associated with considerable unemployment.

Question

​
Exhibit 10A-3 Macro AD-AS Model

In Exhibit 10A-3, the level of real GDP represented by Yp:
A) ​is potential real GDP for this economy. 
B) ​indicates that the economy is experiencing zero inflation. 
C) indicates that the economy is experiencing a recessionary gap. 
D) ​would be associated with considerable unemployment.

Quizplus · Accepted Answer

Yp represents potential real GDP for this economy, which is the maximum output that can be produced without creating inflationary pressures. It is the level of output that would be produced if all the economy's resources were being used at their full potential level. It does not indicate any specific level of inflation, nor does it imply a recessionary gap or associated unemployment.

​ Exhibit 10A-3 Macro AD-AS Model

Exhibit 10A-3 Macro AD-AS Model