When the short-run aggregate supply curve and the aggregate demand curve intersect, the economy is at full employment equilibrium.

Question

Quizplus · Accepted Answer

The intersection of the short-run aggregate supply curve and the aggregate demand curve determines the equilibrium level of output and prices in the economy at a particular time, but it does not necessarily mean the economy is at full employment equilibrium. Full employment equilibrium specifically refers to a situation where all available labor resources are being used efficiently, and the economy is producing at its potential output. The actual equilibrium can occur at, above, or below this level of output.

When the Short-Run Aggregate Supply Curve and the Aggregate Demand