In the short run, the equilibrium price level and the equilibrium level of total output are determined by the intersection of
A) the aggregate demand, the short-run aggregate supply and the long-run aggregate supply curves.
B) the short-run aggregate supply and the long-run aggregate supply curves.
C) the aggregate demand and the short-run aggregate supply curves.
D) the aggregate demand and the long-run aggregate supply curves.

Question

Quizplus · Accepted Answer

In the short run, the equilibrium price level and the equilibrium level of total output are determined by the intersection of the aggregate demand and the short-run aggregate supply curves. This is because in the short run, prices are sticky, meaning they do not adjust quickly to changes in supply and demand. Therefore, changes in demand will primarily impact output in the short run, as represented by the shift in the short-run aggregate supply curve. The long-run aggregate supply curve represents the economy's potential level of output, and in the long run, prices are flexible and will adjust to changes in supply and demand.

In the Short Run, the Equilibrium Price Level and the Equilibrium