Question

both refer to figure 2 please answer both

Figure 2 Refer to figure 2. if full employment occurs at Athen aggregate demand is: Price Level Select one: O a. Too small causing unemployment O b. Too great causing Inflation O c. Too great causing unemployment Od just right AD Nothing selected Select an object or text to format Des 12 ai Q: 0 Real GDP Not yet anwered Points out of 100 Puesto Refer to figure 2.1 full employment occurs at OB then aggregate demand is Select one: O & Too great causing unemployment O b. Too small causing unemployment O. Too great causing inflation O d. Just right

Answer 1

1) Option B

The aggregate demand and aggregate supply decides the scenario of the economy. If the aggregate demand is equal to the aggregate supply then it is called as the equilibrium point. However, this may not be the situation always and demand and supply vary with different conditions. If the aggregate demand is higher than the aggregate supply then it means demand is more but the supply is less which will raise the claim on output and inflation will rise.
The scenario at Q_A represents a similar situation.

2) Option D

The aggregate demand and aggregate supply curve are considered as the market forces of the economy and their intersection point is known as the equilibrium point. The aggregate demand curve is intersecting aggregate supply curve at the point Q_B and so at that point there is recessionary gap or inflationary gap in the economy.