If the money wage rate has fully adjusted to any changes, the economy is
A) experiencing a recessionary gap.
B) experiencing an inflationary gap.
C) at its long- run macroeconomic equilibrium.
D) at a short- run macroeconomic equilibrium but not at a long- run macroeconomic equilibrium.

Question

Quizplus · Accepted Answer

When the money wage rate has fully adjusted to any changes, the economy is at its long- run macroeconomic equilibrium. This means that the economy is producing at its potential output and the price level has stabilized. There is no inflationary or recessionary gap in this situation.

If the Money Wage Rate Has Fully Adjusted to Any