According to the AS-AD model,
A)the AS curve is always equal to potential GDP.
B)the aggregate quantity demanded is typically greater than the aggregate quantity supplied, thereby leading to inflation.
C)the equilibrium is where the AS curve crosses the AD curve but the amount of real GDP at this point is not always equal to potential GDP.
D)changes in the amount of potential GDP is the only factor that shifts both the aggregate supply curve and the aggregate demand curve.
E)the aggregate quantity supplied is typically greater than the aggregate quantity demanded, thereby leading to unemployment.

Question

Quizplus · Accepted Answer

In the AS-AD model, equilibrium occurs where the aggregate supply (AS) curve intersects the aggregate demand (AD) curve. However, the real GDP at this equilibrium point does not necessarily equal potential GDP, as it can be above or below potential GDP depending on economic conditions.

According to the AS-AD Model