When does short-run macroeconomic equilibrium occur?
A)When the price level is constant in the short-run.
B)When the equilibrium lies on the long-run supply curve.
C)When aggregate demand and short-run supply intersect.
D)The two criteria - that aggregate demand and short-run aggregate supply intersect and that the equilibrium lies on the long-run supply curve - must both be satisfied.

Question

Quizplus · Accepted Answer

Short-run macroeconomic equilibrium occurs when aggregate demand and short-run supply intersect. This is because in the short-run, prices are sticky and do not adjust immediately to changes in demand or supply. Therefore, when aggregate demand intersects with short-run supply, it indicates that the economy is producing at a level where output and prices are stable in the short-run. The other options are not correct because short-run equilibrium does not necessarily require a constant price level, and it does not have to lie on the long-run supply curve. However, in the long-run, equilibrium will occur when both AD and SRAS intersect AND the equilibrium lies on the long-run supply curve.

When Does Short-Run Macroeconomic Equilibrium Occur