The equilibrium level of GDP is the level at which

Question

Quizplus · Accepted Answer

The equilibrium level of GDP is the level where aggregate demand equals output, meaning that the economy is producing as much as is being demanded, resulting in a stable level of output and price levels. A situation where aggregate demand exceeds output would lead to inflation and ultimately unsustainable growth, while a situation where aggregate demand is less than output would lead to a decrease in output and ultimately a recession. Depleting inventories to meet demand is not a sustainable long-term solution and would not be considered an equilibrium level of GDP.

The Equilibrium Level of GDP Is the Level at Which