The intersection of the short-run aggregate supply (SRAS), aggregate demand (AD), and long-run aggregate supply (LRAS) curves represents the equilibrium level of output and the price level in the economy. Specifically, this intersection indicates:
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Equilibrium Output: The level of real GDP where the quantity of goods and services demanded equals the quantity supplied in the short run and is also consistent with the economy's long-term productive capacity.
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Price Level: The price level at which the quantity of goods and services demanded in the economy equals the quantity supplied, reflecting both short-run and long-run conditions.
In this equilibrium, the economy is in a stable state where inflation is neither accelerating nor decelerating, and any deviations from this point will lead to changes in employment and output until the economy moves back toward this equilibrium. It typically reflects a state of full employment in the long run.