Use the following to answer questions .
Exhibit: Economic Adjustments
-(Exhibit: Economic Adjustments) Short-run but not long-run equilibrium positions occur at points

Question

Use the following to answer questions .
Exhibit: Economic Adjustments 
-(Exhibit: Economic Adjustments) Short-run but not long-run equilibrium positions occur at points

Quizplus · Accepted Answer

Short-run but not long-run equilibrium positions occur when the economy is at points b and c, as indicated by the intersection of AD1 and SRAS1. Point a represents a recessionary gap, while point d represents an inflationary gap. In the long run, the economy will adjust to its natural rate of output (LRAS), which intersects with AD at point c.

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