If an economy is experiencing neither a recessionary gap nor an inflationary gap,the real output of the economy will be reflected by
A)the aggregate supply curve shifting to the left.
B)the aggregate demand curve shifting to the left.
C)the aggregate expenditure curve shifting upward.
D)the intersection of the AD and AS curves at potential output.
E)a point to the right of the aggregate supply curve at potential GDP.

Question

Quizplus · Accepted Answer

When an economy is experiencing neither a recessionary gap nor an inflationary gap, it is producing at potential output. This means that the aggregate demand (AD) and aggregate supply (AS) curves intersect at the level of potential output. Therefore, the real output of the economy will be reflected by the intersection of the AD and AS curves at potential output.

If an Economy Is Experiencing Neither a Recessionary Gap nor an Inflationary