Consider the exhibit below for the following questions.Figure 20-1
-Refer to Figure 20-1. If the economy starts at A and moves to D in the short run, the economy
A)moves to A in the long run.
B)moves to B in the long run.
C)moves to C in the long run.
D)stays at D in the long run.

Question

Consider the exhibit below for the following questions.Figure 20-1 
-Refer to Figure 20-1. If the economy starts at A and moves to D in the short run, the economy
A)moves to A in the long run. 
B)moves to B in the long run. 
C)moves to C in the long run. 
D)stays at D in the long run.

Quizplus · Accepted Answer

According to the exhibit, point C represents the long-run equilibrium level of output and employment, which is the level of output and employment the economy will settle at after all short-run adjustments have taken place. Therefore, if the economy starts at A and moves to D in the short run, it will eventually move back to C in the long run, as the economy adjusts to its natural level of output and employment.

Consider the Exhibit Below for the Following Questions