When does macroeconomic equilibrium occur?
A)When aggregate supply equals long-run aggregate supply.
B)When the aggregate demand curve intersects the aggregate supply curve.
C)When the aggregate demand curve intersects the LAS curve.
D)When full employment occurs.

Question

Quizplus · Accepted Answer

Macroeconomic equilibrium occurs when the aggregate demand curve intersects the aggregate supply curve. At this point, the quantity of real GDP demanded equals the quantity of real GDP supplied, and the economy is producing at its potential level of output. It is important to note that this may not always coincide with full employment (option D) or when aggregate supply equals long-run aggregate supply (option A), as the economy may experience short-term fluctuations. Also, option C is incorrect as the LAS curve represents the potential output level, not the equilibrium point.

When Does Macroeconomic Equilibrium Occur