An above full- employment equilibrium is
A) a theoretical possibility but cannot happen in reality.
B) the period of time when prices are falling.
C) the equilibrium in which the economy is in most of the time.
D) when real GDP exceeds potential GDP.

Question

Quizplus · Accepted Answer

An above full-employment equilibrium occurs when real GDP exceeds potential GDP, meaning that the economy is operating at a level of output that cannot be sustained in the long run. It is a situation of overheating, which can lead to inflationary pressures. While it is not a constant state of the economy, it can happen periodically in response to short-term factors such as fiscal stimulus or shifts in aggregate demand.

An Above Full- Employment Equilibrium Is