Multiple Choice
long-run equilibrium occurs wherever the aggregate demand curve intersects the short-run aggregate supply curve.
the long-run aggregate supply curve is horizontal.
the price level is the same regardless of the location of the aggregate demand curve.
long-run equilibrium occurs at the intersection of the aggregate demand curve, the short-run aggregate supply curve, and the long-run aggregate supply curve.
1 answer
The correct answer is:
long-run equilibrium occurs at the intersection of the aggregate demand curve, the short-run aggregate supply curve, and the long-run aggregate supply curve.
In the extended aggregate demand-aggregate supply model, long-run equilibrium occurs when all three curves intersect, indicating that the economy is at full employment with stable prices.
