Exhibit 14A-3 Macro AD-AS Model In Exhibit 14A-3, the intersection of AD with SRAS indicates:
A) a short-run equilibrium.
B) a long-run equilibrium.
C) that the economy needs policies to reduce unemployment.
D) that the economy is at full employment.

Question

Exhibit 14A-3  Macro AD-AS Model  In Exhibit 14A-3, the intersection of AD with SRAS indicates:
A) a short-run equilibrium. 
B) a long-run equilibrium. 
C) that the economy needs policies to reduce unemployment. 
D) that the economy is at full employment.

Quizplus · Accepted Answer

The intersection of AD with SRAS indicates a short-run equilibrium where the economy is producing at a level that corresponds to the intersection of the aggregate demand and short-run aggregate supply. It does not necessarily imply full employment or the need for policies to reduce unemployment, as these depend on the position of the economy relative to the long-run aggregate supply curve.

Exhibit 14A-3 Macro AD-AS Model in Exhibit 14A-3, the Intersection