An above-full-employment equilibrium occurs when
A) aggregate demand decreases while neither the short-run nor long-run aggregate supply changes.
B) short-run aggregate supply decreases while neither aggregate demand nor long-run aggregate supply changes.
C) the equilibrium level of real GDP is greater than potential GDP.
D) the equilibrium level of real GDP is less than potential GDP.

Question

Quizplus · Accepted Answer

An above-full-employment equilibrium occurs when the equilibrium level of real GDP is greater than potential GDP, indicating that the economy is producing beyond its sustainable capacity in the short run. This situation often leads to inflationary pressures.

An Above-Full-Employment Equilibrium Occurs When