In the short-run macroeconomic equilibrium
A) real GDP equals potential GDP and aggregate demand determines the price level.
B) the price level is fixed and short-run aggregate supply determines real GDP.
C) real GDP and the price level are determined by short-run aggregate supply and aggregate demand.
D) real GDP is always less than potential GDP.

Question

Quizplus · Accepted Answer

In the short-run macroeconomic equilibrium, both real GDP and the price level are determined by the intersection of the short-run aggregate supply (SRAS) curve and the aggregate demand (AD) curve. This intersection reflects the output level (real GDP) and the price level at which the goods and services market is in equilibrium, taking into account the current state of aggregate supply and demand.

In the Short-Run Macroeconomic Equilibrium