-The reason that it is possible for the economy in the above figure to be at E2 rather than at E1 is that
A) in the long run there is always less than full employment.
B) in the short run the economy can produce more than it can in a long-run full-adjustment situation.
C) AD always shifts outward and never shifts inward.
D) the economy must be in a recession.

Question

-The reason that it is possible for the economy in the above figure to be at E2 rather than at E1 is that
A) in the long run there is always less than full employment. 
B) in the short run the economy can produce more than it can in a long-run full-adjustment situation. 
C) AD always shifts outward and never shifts inward. 
D) the economy must be in a recession.

Quizplus · Accepted Answer

In the short run, it's possible for an economy to produce at a level exceeding its long-run sustainable output due to factors like overtime work, utilization of underused capacity, and other temporary measures. This situation cannot be maintained in the long run without leading to issues such as inflation or resource depletion.

-The Reason That It Is Possible for the Economy in the Above