Answer:
Given a rise in output is than full employment output, an unemployment rate that is higher than the natural rate will put upward pressure on wages and prices
Explanation:
Explain the process through which an economy returns to long-run equilibrium in the AD/AS model when output is above full employment
TERMS DEFINITION
long-run self-adjustment this is when an economy return to full employment output without government intervention
economic growth is when an economy’s ability to produce goods and services increases; in the AD-AS model economic growth is represented by an increase in the LRAS.
AD=Adjustment Demand
When Output falls considerably, price level keeps rising until real GDP returns to full employment output. Given a rise in output is than full employment output, an unemployment rate that is higher than the natural rate will put upward pressure on wages and prices. The long-run outcome is that real GDP returns to the full employment level of output and the unemployment rate is equal to the natural rate.
When more workers are employed, the output increases.
