Everything else held constant, when actual output exceeds potential output ________ aggregate supply ________.
Actual output occurs at the intersection point of AD and SRAS.
Potential Output is represented by the LRAS.
Actual output exceeds potential output implies resources market have shortages and labor is overemployed.
In the long run higher wages casues a decrease in the short run aggregate supply and bring back the economy at the potential output.
Everything else held constant, when actual output exceeds potential output short run aggregate supply decreases
Answer: Short run; decreases.
Note: There might be a fourth option stated Short-run; decreases.
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