Tackle the Test: Free-Response Questions

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  1. Question

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    Refer to the graph above, with the economy operating at P1 and Y1.

    Rubric for FRQ 1 (7 points)

    1 point: Yes

    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: No

    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).

  2. Question

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