Rubric for FRQ 1 (7 points)
1 point: The economy is in short-run equilibrium because it operates at the point where short-run aggregate supply and aggregate demand intersect.
1 point: Short-run equilibrium occurs at a level of aggregate output that is not equal to potential output
1 point: Inflationary gap
1 point: [($1,200 - $1,000)/$1,000] Ă— 100 = 20%
1 point: It will decrease (or approach zero).