In blank one the options are at below or above in blank two

In blank one the options are at, below, or above. in blank two, the options are excessive spending causes production to exceed potential, equilibrium can only occur at the full employment level, there is cyclical unemployment due to insufficient spending

Aa Aa 6. Output and cyclical unemployment The following table provides information on the relationship between output and unemployment. Use the information in the table to answer the questions that follow Output (Billions) $20 $18 $15 $10 Unemployment Rate 096 3% 596 7% Cyclical Unemployment 5% -2% 0% 2% The economy is currently in short-run equilibrium at the intersection of the two curves depicted on the following graph. Place the black point (X symbol) on the graph to indicate the level of output and aggregate expenditure when the economy is at the full-employment equilibrium. The current equilibrium is equilibrium, because the full-employment REAL AGG. EXPENDITURE IBillions of dollars) 25 Full Empl. Eq 45-Degree AE 20 15 10 10 15 20 25 REAL GDP IBillions of dollars) Help Clear All

Solution

An economy is at full employment level when cyclical unemployment rate is zero. This is true at output equal to $15 which is full employment level output. But the economy is in equilibrium where aggregate demand curve intersects aggregate supply curve. This is at q = $ 20. This economy is above full employment level.

This is because excessive spending cause production to exceed potetlntial

Place x at meeting point of ad and as