Question

If the country of Spartania is at full-employment, the GDP is $10 billion. In equilibrium, where does the Short Run Aggregate Supply curve intersect the Aggregate Demand curve?

A. At a GDP of $10 billion
B. At a GDP below $10 billion
C. At a GDP above $10 billion

Answer 1

The Short Run Aggregate Supply (SRAS) curve intersects the Aggregate Demand (AD) curve at the potential Gross Domestic Product (GDP) when a country is at full employment.

Step-by-step explanation:

In equilibrium, the Short Run Aggregate Supply (SRAS) curve intersects the Aggregate Demand (AD) curve at the potential Gross Domestic Product (GDP). In this case, if the country of Spartania is at full employment with a GDP of $10 billion, the SRAS curve would intersect the AD curve at a GDP of $10 billion.