C. explain the process through which an economy returns to long-run equilibrium in the ad/as model when output is above full employmentc. explain the process through which an economy returns to long-run equilibrium in the ad/as model when output is above full employmentc. explain the process through which an economy returns to long-run equilibrium in the ad/as model when output is above full employmentc. explain the process through which an economy returns to long-run equilibrium in the ad/as model when output is above full employment

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-adjustmentthis 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.