Question

On the far right side of the AS curve, the economy is producing ________ potential, and on the far left of the curve, it is producing ________ potential.

A) at; below

B) below; above

C) above; below

Answer 1

Ans.

Correct answer is option C. C) above; below

Aggregate supply (AS) represents the quantity of goods and services producers are willing to supply at any given level of prices. It also reflects the amount of labor and capital that households are willing to offer into the marketplace at given real wage rates and cost of capital.

The aggregate supply curve (AS curve) represents the level of domestic output that companies will produce at each price level.

On the far-right side of the AS curve, the economy is producing above potential, and on the far left of the curve, it is producing below potential