-In the above figure, at the point where AD equals SAS
A) real GDP exceeds potential GDP.
B) potential GDP exceeds real GDP.
C) the economy is in a recession.
D) the unemployment rate is zero.

Question

-In the above figure, at the point where AD equals SAS
A) real GDP exceeds potential GDP. 
B) potential GDP exceeds real GDP. 
C) the economy is in a recession. 
D) the unemployment rate is zero.

Quizplus · Accepted Answer

At the point where AD equals SAS (Short-run Aggregate Supply), real GDP is at its peak, exceeding potential GDP. This scenario typically indicates an overheated economy, not a recession or zero unemployment. Potential GDP is the level of output when the economy is at full employment, and exceeding it suggests that resources are being used beyond their sustainable capacity.

-In the Above Figure, at the Point Where AD Equals