Long-run macroeconomic equilibrium occurs when: a. aggregate demand equals short

Question

Long-run macroeconomic equilibrium occurs when:

a. aggregate demand equals short-run aggregate supply.

b. aggregate demand equals short-run aggregate supply and they intersect at a point on the long-run supply curve.

c. unemployment equals zero.

d. output is above potential GDP.

a. aggregate demand equals short-run aggregate supply.

b. aggregate demand equals short-run aggregate supply and they intersect at a point on the long-run supply curve.

c. unemployment equals zero.

d. output is above potential GDP.

Explanation / Answer

When there is a long run macroeconomic equilibrium in the economy short run aggregate demand curve short run supply curve and long run in the supply curve all meet at one single point. This ensures that the current GDP is equal to long-run potential GDP and that there is no inflationary or recessionary gap. Therefore option B is correct

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