Exhibit 14-4

-Refer to the graph in the exhibit.At what point does short-run equilibrium occur?
A) at point a
B) at point b
C) at point c, where the actual price level exceeds the expected price level
D) at the origin point c, where the actual price level is less than the expected price level

Question

Exhibit 14-4
 
-Refer to the graph in the exhibit.At what point does short-run equilibrium occur?  
A) at point a 
B) at point b 
C) at point c, where the actual price level exceeds the expected price level 
D) at the origin point c, where the actual price level is less than the expected price level

Quizplus · Accepted Answer

Short-run equilibrium in economic models, particularly in the context of the Aggregate Demand-Aggregate Supply (AD-AS) model, occurs at the point where the aggregate demand curve intersects the short-run aggregate supply curve. This point reflects the current price level and output level where the expectations of sellers about the price level are met. Point C, where the actual price level exceeds the expected price level, indicates a situation where the economy might be experiencing higher demand than anticipated, leading to an increase in prices and output in the short run. This is consistent with the dynamics of short-run equilibrium in the AD-AS model.

Exhibit 14-4 -Refer to the Graph in the Exhibit.At What Point Does