Exhibit 14A-2 Macro AD-AS Model

-In Exhibit 14A-2,the intersection of AD with SRAS indicates:
A) a short-run equilibrium.
B) a long-run equilibrium.
C) that the economy needs policies to reduce unemployment.
D) that the economy is at full employment.

Question

Exhibit 14A-2 Macro AD-AS Model
 
-In Exhibit 14A-2,the intersection of AD with SRAS indicates:
A) a short-run equilibrium. 
B) a long-run equilibrium. 
C) that the economy needs policies to reduce unemployment. 
D) that the economy is at full employment.

Quizplus · Accepted Answer

The intersection of AD (aggregate demand) with SRAS (short-run aggregate supply) indicates a short-run equilibrium, where the economy is producing at the level of output that is consistent with the current level of aggregate demand. However, this point may not represent full employment or long-run equilibrium, as it depends on the current level of prices and the flexibility of input prices. Therefore, choices B, C, and D are incorrect.