Within the framework of the AD/AS model, in the long run, output
A) will exceed the economy's long-run capacity.
B) will be less than the economy's long-run capacity.
C) will converge toward the economy's long-run capacity.
D) must equal approximately 95 percent of the economy's long-run capacity.

Question

Quizplus · Accepted Answer

In the long run, the economy will adjust to its potential output level, which is determined by the availability of factors of production such as labor, capital, and technology. As a result, the long-run aggregate supply curve is vertical, indicating that changes in aggregate demand will not affect output in the long run but only affect prices. Therefore, in the long run, output will converge to the economy's long-run capacity level.

Within the Framework of the AD/AS Model, in the Long