Figure 10-16
Suppose an economy is currently operating at output Y1 associated with AD1 and SRAS1, shown in . Initially, the output of this economy is
a.
above its potential, and the rate of unemployment is greater than the natural rate.
b.
below its potential, and the rate of unemployment is greater than the natural rate.
c.
above its potential, and the rate of unemployment is less than the natural rate.
d.
below its potential, and the rate of unemployment is less than the natural rate.
b
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