Exhibit 10.5 -Refer to Exhibit 10.5, Which Shows the Short-Run Equilibrium in the Short-Run

Multiple Choice

Exhibit 10.5

-Refer to Exhibit 10.5, which shows the short-run equilibrium in an aggregate demand-aggregate supply model. If the economy is currently producing Y₁ level of output, _____

A) potential output is less than actual output.
B) there is zero unemployment.
C) the price level will rise eventually.
D) aggregate supply will fall to restore equilibrium.
E) the actual unemployment rate is more than the natural rate.