(Figure: Understanding Aggregate Graphs 2) If an economy is at point a, this figure depicts the economy in
A) long-run equilibrium only.
B) short-run equilibrium only.
C) both short-run and long-run equilibrium.
D) neither short-run nor long-run equilibrium.

Question

(Figure: Understanding Aggregate Graphs 2)  If an economy is at point a, this figure depicts the economy in
A) long-run equilibrium only. 
B) short-run equilibrium only. 
C) both short-run and long-run equilibrium. 
D) neither short-run nor long-run equilibrium.

Quizplus · Accepted Answer

Point a represents the intersection of the short-run aggregate supply (SRAS) and aggregate demand (AD) curves, indicating short-run equilibrium. Additionally, at point a, the SRAS curve intersects the long-run aggregate supply (LRAS) curve, indicating that the economy is also at long-run equilibrium. Therefore, the correct answer is C, both short-run and long-run equilibrium.

(Figure: Understanding Aggregate Graphs 2) If an Economy Is