Figure 11-5
-Refer to Figure 11-5. Short-run but not long-run equilibrium positions occur at points
A) a and b.
B) b and c.
C) c and d.
D) a and c.

Question

Figure 11-5 
-Refer to Figure 11-5. Short-run but not long-run equilibrium positions occur at points
A) a and b. 
B) b and c. 
C) c and d. 
D) a and c.

Quizplus · Accepted Answer

Short-run equilibrium positions occur where the AD and SRAS curves intersect. Therefore, the short-run equilibrium positions are points b and c. However, in the long-run, the economy will adjust to the natural rate of unemployment and the LRAS curve, which means the only long-run equilibrium position is at point c. Point b is a temporary position of lower unemployment and higher output, but it is not sustainable in the long run.

Figure 11-5 -Refer to Figure 11-5. Short-Run but Not Long-Run Equilibrium Positions