In long-run macroeconomic equilibrium
A) real GDP equals potential GDP.
B) the price level is fixed and aggregate demand determines real GDP.
C) real GDP and the price level are determined by short-run aggregate supply and aggregate demand and long-run aggregate supply is irrelevant.
D) real GDP is less than potential GDP.

Question

Quizplus · Accepted Answer

Long-run macroeconomic equilibrium occurs when real GDP equals potential GDP, indicating that the economy is operating at full capacity without excessive inflationary pressure. In this state, prices and wages adjust to maintain the equilibrium level of output, and the economy is in a stable, sustainable state.

In Long-Run Macroeconomic Equilibrium