If the short-run aggregate supply increases by less than the long-run aggregate supply,then,at the short-run equilibrium
A)GDP will be below potential GDP.
B)aggregate demand will increase.
C)GDP will be above potential GDP.
D)GDP will be equal to potential GDP.

Question

Quizplus · Accepted Answer

If the short-run aggregate supply increases by less than the long-run aggregate supply, there will be a temporary increase in real GDP but it will still be below potential GDP. This is because the increase in aggregate supply is not enough to fully meet the increase in aggregate demand. Therefore, the economy will operate at a point below full employment equilibrium and there will still be some level of unemployment or underutilization of resources.

If the Short-Run Aggregate Supply Increases by Less Than the Long-Run