Over full employment equilibrium is a situation in which AD = AS _______ the full employment level.
Which of the following options suits best in the above blank?
Answer & explanation
Correct answer: option 2
The correct answer is Option 2: Over full employment equilibrium
Over full employment equilibrium is a situation where aggregate demand (AD) equals aggregate supply (AS) beyond the full employment level. This means that the economy is producing beyond its full capacity, often leading to inflationary pressures.