Discussion
When the short-run equilibrium exists below full employment level of output then:
Answer: B
When the short run equilibrium is below the full employment output, there is unemployment, and the short run aggregate supply curve can be to the right of the full employment output (if the economy has resources unused, supply can exceed that level at some price). The other options are statements about adjustment in the long run, which need not follow at once. The key gives option B. At such a point there are unemployed resources, so output can increase without a strong rise in prices.
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