Exhibit 15.5

-Exhibit 15.5 depicts the aggregate demand curve and the short-run aggregate supply curve of an economy. In this figure, short-run equilibrium occurs at _____
A) point b, where actual output exceeds potential output.
B) point a, where actual output exceeds potential output.
C) point c, where the actual price level exceeds the expected price level.
D) point c, where the actual price level is less than the expected price level.
E) point b, where the actual price level exceeds the expected price level.

Question

Exhibit 15.5
 
-Exhibit 15.5 depicts the aggregate demand curve and the short-run aggregate supply curve of an economy. In this figure, short-run equilibrium occurs at _____
A) point b, where actual output exceeds potential output. 
B) point a, where actual output exceeds potential output. 
C) point c, where the actual price level exceeds the expected price level. 
D) point c, where the actual price level is less than the expected price level. 
E) point b, where the actual price level exceeds the expected price level.

Quizplus · Accepted Answer

In the context of aggregate demand and short-run aggregate supply curves, short-run equilibrium occurs at the point where these two curves intersect. Point c represents this intersection, indicating the equilibrium level of output and prices. The statement that the actual price level exceeds the expected price level at this point is consistent with the short-run dynamics of the economy, where prices can deviate from what was anticipated due to various short-term factors.

Exhibit 15.5 -Exhibit 15.5 Depicts the Aggregate Demand Curve and the Short-Run