The graph shown displays various price and output levels in an economy. If the economy is currently at point E₁, it must be in: A) long-run equilibrium. B) a recession. C) an economic boom. D) an economic recovery.

Question

Quizplus · Accepted Answer

The point E₁ is at the intersection of the long-run aggregate supply curve (LAS) and the aggregate demand curve (AD). This intersection represents a long-run equilibrium where the economy is producing at its potential output level, and the price level has adjusted to ensure that the economy is operating at full employment. Therefore, the correct answer is A, long-run equilibrium.

The Graph Shown Displays Various Price and Output Levels in an Economy