Short-run equilibrium occurs at the intersection of
A) the LAS and AD curves.
B) the SAS, LAS, and AD curves.
C) the SAS and AD curves.
D) the SAS and LAS curves.

Question

Quizplus · Accepted Answer

Short-run equilibrium occurs where the AD curve intersects the SAS curve. The LAS curve represents a long-run equilibrium level of output and is not relevant for determining short-run equilibrium. Therefore, (A) and (B) are incorrect. The SAS and LAS curves intersect at the potential GDP, but this does not necessarily represent short-run equilibrium because there may be a gap between the AD and SAS curves. Therefore, (D) is also incorrect.

Short-Run Equilibrium Occurs at the Intersection of