On a temporary timeframe, the economy can expand past full employment.
a. In order to produce this higher level of output when the economy is already producing at potential GDP, what must businesses do?
run machines longer, which increases maintenance costs
reduce worker wages
pay higher wages in order to entice employed workers to leave their current firms
pay workers overtime
b. What is an important distinction of this rightward shift in AD, when compared to the same shift when short-run equilibrium is below full employment?
An increase in aggregate demand when above full employment causes a(n) increase in the price level compared to the equivalent shift that occurs when the short-run equilibrium is potential GDP.