Question

Long-run macroeconomic equilibrium occurs when A. output is above potential GDP. B. the aggregate demand curve intersects the short-run aggregate supply curve. C. structural and frictional unemployment equal zero. D. the aggregate demand and short-run aggregate supply curves intersect at a point on the long-run aggregate supply curve.

Answer 1

Answer:

D) the aggregate demand and short-run aggregate supply curves intersect at a point on the long-run aggregate supply curve.

Explanation:

Long run macroeconomic equilibrium occurs when real GDP reaches its potential output on the long run aggregate supply (LRAS) curve. At this point:

• There will be no cyclical unemployment, only natural unemployment will occur (frictional + structural).
• The general price level should also be equal to the anticipated price level.
• Producers attain potential output.