According to the AS-AD model,
A)the aggregate quantity supplied is typically greater than the aggregate quantity demanded,thereby leading to unemployment.
B)the equilibrium is where the AS curve crosses the AD curve,but the amount of real GDP at this point is not always equal to potential GDP.
C)the aggregate quantity demanded is typically greater than the aggregate quantity supplied,thereby leading to inflation.
D)the AS curve is always equal to potential GDP.
E)changes in the amount of potential GDP is the only factor that shifts both the aggregate supply curve and the aggregate demand curve.

Question

Quizplus · Accepted Answer

The AS-AD model shows that the equilibrium point is where the AS curve and the AD curve intersect. However, the amount of real GDP at this point may not always be equal to potential GDP due to factors such as cyclical fluctuations in the economy. Choice A and C are incorrect because neither the aggregate quantity supplied nor the aggregate quantity demanded is necessarily always greater. Choice D is incorrect because the AS curve can shift due to factors other than changes in potential GDP. Choice E is incorrect because changes in other factors, such as government spending or investment, can also shift the AS and AD curves.

According to the AS-AD Model