The level of output at which the short-run aggregate supply curve and the aggregate demand curve intersect is the full-employment level of GDP.

Question

Quizplus · Accepted Answer

The level of output at which the short-run aggregate supply curve and the aggregate demand curve intersect determines the equilibrium level of GDP and prices in the economy, but this does not necessarily correspond to the full-employment level of GDP. Full employment refers to the level of employment where there is no cyclical unemployment, and achieving this may not coincide with the short-run equilibrium.

The Level of Output at Which the Short-Run Aggregate Supply