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

Question

Quizplus · Accepted Answer

When SRAS and AD intersect at a real output level that is less than the natural level of real output, the economy is in short-run equilibrium. However, this equilibrium is not sustainable in the long run, as real output will tend to rise from its current level as the economy adjusts to long-run equilibrium.

When SRAS and AD Intersect at a Real Output Level