Assume that the present price level is P1.

-Refer to the above graph to answer this question.Which graph illustrates full-employment equilibrium?
A)A
B)B
C)C

Question

Assume that the present price level is P1.
 
-Refer to the above graph to answer this question.Which graph illustrates full-employment equilibrium?
A)A 
B)B 
C)C

Quizplus · Accepted Answer

Graph C illustrates full-employment equilibrium because it intersects the long-run aggregate supply curve (LRAS) at the point where potential output (Yf) is produced. At this point, the economy is producing at its maximum sustainable level, with all resources being used efficiently. Graphs A, B, and D do not illustrate full-employment equilibrium as they either intersect the LRAS curve at a point below potential output or to the left of the LRAS curve.

Assume That the Present Price Level Is P1