Macroeconomic equilibrium occurs when
A)real GDP is equal to potential GDP.
B)there is no inflation.
C)the economy is fully employed.
D)the price level equals the potential price level.
E)the aggregate quantity demanded is equal to the aggregate quantity supplied.

Question

Quizplus · Accepted Answer

Macroeconomic equilibrium occurs when the aggregate quantity demanded (AD) is equal to the aggregate quantity supplied (AS). This means that the economy is producing and consuming all of the goods and services that it is capable of producing without causing inflationary or recessionary pressures. Real GDP being equal to potential GDP (choice A) would be one way to ensure that AD and AS are equal, but it is not necessary. The absence of inflation (choice B) is a result of equilibrium, but not a defining characteristic. Full employment (choice C) is important for the economy, but not necessary for macroeconomic equilibrium. The price level being equal to the potential price level (choice D) is not a widely used term in economics and does not apply to this concept.

Macroeconomic Equilibrium Occurs When