An above full- employment equilibrium occurs when
A) short- run aggregate supply decreases while neither aggregate demand nor long- run aggregate supply changes.
B) the equilibrium level of real GDP is greater than potential GDP.
C) aggregate demand decreases while neither the short- run nor long- run aggregate supply changes.
D) the equilibrium level of real GDP is less than potential GDP.

Question

Quizplus · Accepted Answer

An above full-employment equilibrium occurs when the equilibrium level of real GDP is greater than potential GDP. This means that the economy is producing more than it is capable of producing in the long run, which can lead to inflationary pressures.

An Above Full- Employment Equilibrium Occurs When