In the fooling model's AD/SAS/LAS diagram,short-run equilibria to the right of the LAS curve require the price level to be
A)above what workers expect.
B)above what firms expect.
C)below what workers expect.
D)below what firms expect.

Question

Quizplus · Accepted Answer

In the short-run, if the economy is to the right of the Long-Run Aggregate Supply (LAS) curve, it indicates that the actual output is above the potential output. This situation typically requires the price level to be above what workers expect, leading to lower real wages and increased production.

In the Fooling Model's AD/SAS/LAS Diagram,short-Run Equilibria to the Right