(Solved): Consider the following scenario: The economy is in a recessionary gap, producing an output of $5 tr ...

Consider the following scenario: The economy is in a recessionary gap, producing an output of $5 trillion, which is less than the Natural Real GDP of $7 trillion. The following graph shows two production possibilities frontiers (PPFS) for the economy. The PPF closer to the origin (blue curve) is the economy's institutional PPF, and the PPF farther from the origin (purple curve) is the economy's physical PPF. Place the grey point (star symbol) on one of the black points (plus symbol) to indicate the state of the economy when it is operating at the short- run equilibrium described above. ALL OTHER GOODS (Thousands of units) 10 9 B 7 6 5 e Physical PPF Institutional PPF F Two PPFs XE D B * State of Economy