Question

The economy is in long-run equilibrium: Select one:

Answer 1

Answer:

A, when the AD and AS curves intersect at potential output,Y.

Explanation:

Aggregate demand curve is a graphical representation that shows the relationship between total goods and services and its price levels.

Aggregate supply curve is a graphical representation that shows the relationship between the total amount of good and services firms are willing to sell and at what price the want to sell.

For an economy to be in long-run equilibrium, an economy has to have both curves meet at a point Y which is the potential output of the economy. This means simply that demand and supply has to be balanced (in equilibrium).

I hope this helps.