When SRAS and AD intersect at a real output level that is greater than the natural level of real output,is the economy in equilibrium?
A)It is in short-run equilibrium, and real output will tend to fall from its current level as it adjusts to long-run equilibrium.
B)It is in short-run disequilibrium, and real output will tend to rise from its current level as it adjusts to long-run equilibrium.
C)It is in short-run equilibrium, and real output will tend to rise from its current level as it adjusts to long-run equilibrium.
D)It is in short-run disequilibrium, and real output will tend to fall from its current level as it adjusts to long-run equilibrium.

Question

Quizplus · Accepted Answer

The economy is in short-run equilibrium because SRAS and AD intersect, but since output is above the natural level, it will tend to fall as it adjusts to long-run equilibrium.

When SRAS and AD Intersect at a Real Output Level