Question

Which of the following is true about the equilibrium real output in the aggregate demand-aggregate supply (AD-AS) model in the short run?

A. Equilibrium real output is always above full employment.
B. Equilibrium real output is always below full employment.
C. Equilibrium real output is always equal to full employment.
D. Equilibrium real output can be above, equal to, or below full employment.
E. Equilibrium real output is indeterminate.

Answer 1

In the short run, equilibrium real output in the AD-AS model can be above, equal to, or below full employment.

Step-by-step explanation:

In the short run, equilibrium real output in the aggregate demand-aggregate supply (AD-AS) model can be above, equal to, or below full employment. This means that option D, Equilibrium real output can be above, equal to, or below full employment, is true.

When aggregate demand shifts, the equilibrium level of real GDP may change. If aggregate demand decreases, the equilibrium real output will be below full employment, resulting in unemployment. Conversely, if aggregate demand increases, the equilibrium real output can be above full employment, indicating a booming economy.

Therefore, the correct answer is option D: Equilibrium real output can be above, equal to, or below full employment.

Answer 2

In the short run, the equilibrium real output in the AD-AS model can be above, equal to, or below full employment.

Step-by-step explanation:

In the short run, the equilibrium real output in the aggregate demand-aggregate supply (AD-AS) model can be above, equal to, or below full employment. This means that option D, 'Equilibrium real output can be above, equal to, or below full employment,' is true about the equilibrium real output in the short run.