The figure below shows the short-run aggregate supply curve of an economy.If the actual price level exceeds the expected price level,then: Figure 10.1 A)equilibrium output is likely to be Y₂ in the short run. B)equilibrium output is likely to be Y₁ in the short run. C)equilibrium output is likely to be Y₃ in the short run. D)potential output is greater than actual output. E)unemployment is above the natural rate.

Question

Quizplus · Accepted Answer

If the actual price level exceeds the expected price level, then the short-run equilibrium will be at a higher price level and higher output level than the previous equilibrium point. From the graph, we can see that the new equilibrium point will be at Y₃, as it intersects with the short-run aggregate supply curve at the higher price level. Therefore, the correct answer is C.

The Figure Below Shows the Short-Run Aggregate Supply Curve of an Economy.If