Question

Yn is the level of output that occurs when

A. goods market and financial markets are in equilibrium
B. u=0
C. the economy is operating at the u rate consistent with both the WS and PS equations
D. there is no discouraged workers in the economy
E. markup (m) = 0

Answer 1

The correct answer is option A. Yn represents the level of output when both goods and financial markets are in equilibrium, corresponding with full employment or potential GDP according to macroeconomic principles.

Step-by-step explanation:

The student is asking about the concept of Yn, which represents a level of output under certain economic conditions. Among the options provided, the correct one relates to the situation in which Yn occurs.

Since Yn typically refers to the level of output in an economy when the markets are in equilibrium, and noting that the Keynesian Cross Diagram mentions equilibrium as the point where aggregate demand (AD) intersects with aggregate supply (AS), which also corresponds to full employment or potential GDP (Yp), the closest option reflecting this condition is when goods market and financial markets are in equilibrium.

Option A: Yn is the level of output that occurs when goods market and financial markets are in equilibrium, seems to accurately reflect the situation described in the reference material provided and relates to the principle of macroeconomic equilibrium where both the goods and financial markets are balanced.