Use the figure below to answer the following question(s). Figure 10-8
The economy depicted in Figure 10-8 is in
A) short-run equilibrium at less than the full-employment output level.
B) short-run equilibrium at an output level beyond full employment.
C) long-run equilibrium at point a.
D) long-run equilibrium at point b.

Question

Use the figure below to answer the following question(s). Figure 10-8
 The economy depicted in Figure 10-8 is in
A) short-run equilibrium at less than the full-employment output level. 
B) short-run equilibrium at an output level beyond full employment. 
C) long-run equilibrium at point a. 
D) long-run equilibrium at point b.

Quizplus · Accepted Answer

The economy is in short-run equilibrium at point A, which is below the full-employment level of output (Yf). This is because the aggregate demand (AD) curve intersects the short-run aggregate supply (SRAS) curve at a point to the left of the long-run equilibrium output level (Yf). In the long run, the economy will adjust to the full-employment level of output, but in the short run, there is a temporary equilibrium at a lower level of output with some unemployment.

Use the Figure Below to Answer the Following Question(s)