**Title: Analyzing Economic Equilibrium and Real GDP****Graph Explanation:**The graph depicts an economic model with three curves:1. **Aggregate Demand (AD)**: Represented by the orange upward-sloping line, which indicates the relationship between price level and output (GDP).2. **Aggregate Supply**: The blue downward-sloping line, showing another potential economic relationship between price level and output.3. **Potential GDP Line**: The green vertical line represents the level of output where the economy is at full employment, also known as potential GDP.The intersection point of the AD curve and the Aggregate Supply curve shows the current equilibrium output and price level.**Questions:**1. **True or False**: The economy is currently in short-run equilibrium. - [ ] True - [ ] False2. **Fill in the Blank**: The current level of real GDP is __________ the potential GDP. - [ ] less than - [ ] equal to - [ ] greater thanConsider the economic implications of the graph to determine the answers. Now consider the following economic conditions.### Graph Explanation:The graph represents economic conditions with three key curves:1. **LRAS (Long-Run Aggregate Supply):** This is a vertical green line at 70 on the output axis. It indicates the economy’s potential output when all resources are used efficiently, unaffected by the price level.2. **SRAS (Short-Run Aggregate Supply):** This is an upward-sloping orange line. It shows the relationship between the price level and the quantity of goods and services that firms are willing to produce in the short run.3. **AD (Aggregate Demand):** This is a downward-sloping blue line. It reflects the total quantity of goods and services demanded at different price levels.### Key Details:- The vertical axis is labeled "PRICE LEVEL," ranging from 60 to 140.- The horizontal axis is labeled "OUTPUT," ranging from 60 to 100.Given the economic conditions depicted by the graph, answer the following questions.**True or False:** The economy is currently in short-run equilibrium.

The above diagram depicts a situation where the economy is in short-run equilibrium. The point where…

Answered: Given the economic conditions depicted…

Given the economic conditions depicted by the graph, answer the following questions. True or False: The economy is currently in short-run equilibrium.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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