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Consider the Aggregate Demand (AD) and Aggregate Supply (AS) diagram below:
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1) Which letter (A or B) corresponds to the long-run full-employment equilibrium?
2) Suppose the economy is at point B in the diagram. How far is output below potential in terms of a percentage? (round your answer to one decimal point.)
3) Suppose the natural rate of unemployment is 4%. According to Okun's Law, what would be the unemployment rate at point B? (round your answer to one decimal point.)