The economy pictured in the figure below has a(n) ________ gap with a short-run equilibrium combination of inflation and output indicated by point ________.  

Why is it important to understand fixed exchange rates in the modern global economy?

What will be an ideal response?

The circular flow model demonstrates

A) the role of the government in overseeing the market system. B) the roles played by households and firms in the market system. C) how shortages and surpluses are eliminated in a market. D) how demand and supply for goods and services are brought into equilibrium.