Learning Path
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A
A → C → B → D
B
A → B → C → D
C
C → A → D → B
D
D → B → A → C
Understanding the Answer
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Answer
To achieve Full Employment Equilibrium in an economy, the process begins when aggregate demand increases due to external factors, such as increased consumer spending or government investment. This rise in demand leads to a higher demand for goods and services, prompting businesses to produce more. As they respond, short-run aggregate supply adjusts to meet this increased demand, allowing the economy to grow and output to rise. Eventually, when the economy’s output reaches its potential level, it stabilizes, and long-run aggregate supply is established at this new equilibrium. For example, if a new technology boosts consumer interest in products, businesses will ramp up production until the economy finds its balance at Full Employment.
Detailed Explanation
First, demand goes up due to outside factors. Other options are incorrect because This option suggests that output reaches its potential before supply adjusts; This option starts with supply adjusting before demand increases.
Key Concepts
Full Employment Equilibrium
Aggregate Demand and Supply
Economic Stability
Topic
Full Employment Equilibrium
Difficulty
medium level question
Cognitive Level
understand
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