APFIVE Short-Run Equilibrium and Inflationary Gaps
Country X’s unemployment rate is 3%, below the natural rate of 5%, and inflation is accelerating. Which statement best describes the AD-AS equilibrium in this economy?
A
Short-run equilibrium below potential output
B
Short-run equilibrium above potential output
C
Stagflation equilibrium with cost-push inflation
D
Long-run equilibrium at potential output
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