Question

A situation when AS = AD along with fuller utilisation of resources in the economy is called:

Options

• underemployment equilibrium.

• inflationary gap.

• equilibrium without excess capacity.

• deflationary gap.

Answer 1

equilibrium without excess capacity.

Explanation:

When AD = AS, the whole amount of goods and services that producers want to make during the year is precisely equal to the total amount of money that buyers want to spend on goods and services during the year, hence there is no excess capacity.