At long-run macroeconomic equilibrium,__________ .
A) an inflationary gap exists
B) a recessionary gap exists
C) real GDP equals potential GDP
D) real GDP is less than potential GDP but is as close as it is possible to be

Question

At long-run macroeconomic equilibrium,__________  .
A) an inflationary gap exists
B) a recessionary gap exists
C) real GDP equals potential GDP
D) real GDP is less than potential GDP but is as close as it is possible to be

Quizplus · Accepted Answer

At long-run macroeconomic equilibrium, the economy is producing at its potential output, which is also known as potential GDP. This means that there is no excess demand or excess supply in the economy, which eliminates both inflationary and recessionary gaps. Therefore, real GDP equals potential GDP at long-run macroeconomic equilibrium.

At Long-Run Macroeconomic Equilibrium,__________