Question

which of the following statements is true of the economy in the long run? In the long run, real GDP eventually moves to potential because all wages and prices are assumed to be flexible. the economy can achieve its natural level of employment and potential output at any price level. there is no cyclical unemployment.

Answer 1

Answer:

All of these is true.

Explanation:

In the long run, the real GDP moves to potential level. It is because in the long run when the price level increases, the price of factor inputs increases as well.

The economy can produce reach natural rate of employment and potential output at any price level. Increase in price does not cause the output to increase in the long run.

Improvement in the state of technology or increase in available resources causes the output level to increase.

Cyclical unemployment will not exist in the long run, only natural unemployment will exist. All the available resources will be fully employed in the long run.