Use the figure below to answer the following questions.

Figure 26.3.1
-Refer to Figure 26.3.1. Econoworld is at its short-run macroeconomic equilibrium. There is a difference between ________ real GDP and potential GDP of $________ billion.
A)above full-employment equilibrium; 40
B)above full-employment equilibrium; 20
C)below full-employment equilibrium; 40
D)below full-employment equilibrium; 20
E)full-employment equilibrium; 0

Question

Use the figure below to answer the following questions.
  
Figure 26.3.1
-Refer to Figure 26.3.1. Econoworld is at its short-run macroeconomic equilibrium. There is a difference between ________ real GDP and potential GDP of $________ billion.
A)above full-employment equilibrium; 40 
B)above full-employment equilibrium; 20 
C)below full-employment equilibrium; 40 
D)below full-employment equilibrium; 20 
E)full-employment equilibrium; 0

Quizplus · Accepted Answer

The short-run macroeconomic equilibrium occurs where the AD curve intersects the SRAS curve. In this figure, it is above the LRAS curve, indicating that the economy is producing more than the potential GDP. The difference between real GDP and potential GDP is the output gap, which is equal to $40 billion. Therefore, the correct answer is C) below full-employment equilibrium and $40 billion.

Use the Figure Below to Answer the Following Questions