Within the framework of the AD/AS model, if a long-run equilibrium is present in the goods and services market,
A) decision makers will have accurately forecast the current price level when they arrived at resource price and loanable funds agreements.
B) the profit rates of the firms will generally exceed the competitive level.
C) the actual rate of unemployment will be less than the natural rate of unemployment.
D) output will exceed the economy's long-run sustainable output.

Question

Quizplus · Accepted Answer

A long-run equilibrium in the goods and services market implies that the actual price level is equal to the expected price level, which means decision makers have accurately forecasted the current price level when they arrived at resource price and loanable funds agreements. Option B is incorrect as in the long run, firms' profit rates will be equal to the competitive level. Option C is incorrect as the actual rate of unemployment will be equal to the natural rate of unemployment in the long run, not less than the natural rate of unemployment. Option D is incorrect as output in the long run will be at the economy's long-run sustainable output.

Within the Framework of the AD/AS Model, If a Long-Run