During an economic expansion or boom, it is possible for a short-run equilibrium to occur at a point that exceeds potential GDP.

Question

Quizplus · Accepted Answer

During an economic expansion or boom, there can be a temporary increase in the economy's productive capacity due to factors such as increased labor force participation, technological advancements, and investment in capital goods. This can lead to a short-run equilibrium point that exceeds potential GDP. However, in the long run, potential GDP will catch up and the economy will return to its potential output level.

During an Economic Expansion or Boom, It Is Possible for a Short-Run