Question

Please assist with the following:

Using the AD/AS model, if the current equilibrium is in the steep section of the aggregate supply curve, then this suggests that:

The economy is in recession
GDP is substantially below potential OR
Unemployment is low?

Next:

How does an economist depict cyclical unemployment on an aggregate demand-aggregate supply (AD-AS) diagram?

Showing how close the economy is to potential or full employment level of GDP.

By depicting the size of the inflationary gap

or

By depicting how much the AD curve has moved past potential or full employment?

Answer 1

rice operating hose tü Unemployment is low. If the current equilibrium is in the steep section of the Aggregate supply love, as shame, in d icaran then economy is level. and unemployment is low because it is close to its Real app X natural rate. A-2) when Aggregate demand A-2) when curve of the economy shifts Aggreg we leads to cyclical unemployme economy. der the diagram, enrrent equilibrium bure occurs at point which is lend above the full employment equilibrium * -- and thus represents Inflationary gap in the econoiny = xtyl. in the LRAS SRAS Real & GDP Inflation