The full-employment and full adjustment level of real output of goods and services in the economy is represented by
A)the LRAS curve.
B)the SRAS curve.
C)the AD curve.
D)the distance between the LRAS curve and the SRAS curve.

Question

Quizplus · Accepted Answer

The LRAS (long run aggregate supply) curve represents the full-employment and full adjustment level of real output of goods and services in the economy. The LRAS curve shows the maximum sustainable level of output that can be produced given the available resources and technology. The SRAS (short run aggregate supply) curve shows the amount of output that can be produced in the short run, but it can be affected by changes in input prices, such as wages and raw materials costs. The AD (aggregate demand) curve represents the total amount of goods and services that consumers, businesses, and the government are willing to purchase at different price levels. The distance between the LRAS curve and the SRAS curve represents the degree of price rigidity or flexibility in the economy, but it does not represent the full-employment and full adjustment level of real output.

The Full-Employment and Full Adjustment Level of Real Output of Goods