If the short- run macroeconomic equilibrium occurs with real GDP greater than potential output, the economy is
A)threatened with a demand shock.
B)experiencing an inflationary output gap.
C)experiencing a recessionary output gap.
D)at its full- employment level of output.
E)operating at full capacity.

Question

Quizplus · Accepted Answer

When the short-run macroeconomic equilibrium occurs with real GDP greater than potential output, it indicates that the economy is operating beyond its capacity and experiencing an inflationary output gap. This means that there is more demand for goods and services than what the economy can produce, leading to upward pressure on prices.

If the Short- Run Macroeconomic Equilibrium Occurs with Real GDP