The economy is in both a short- and long-run equilibrium if:
A)Current inflation equals expected inflation and current output equals potential output
B)The aggregate demand curve intersects the short-run aggregate supply curve
C)The long-run aggregate supply curve is at potential output
D)The short-run aggregate supply curve intersects the long-run aggregate supply curve at potential output

Question

Quizplus · Accepted Answer

In both short- and long-run equilibrium, current inflation equals expected inflation, and current output equals potential output, indicating that the economy is operating at full capacity without inflationary or recessionary gaps.

The Economy Is in Both a Short- and Long-Run Equilibrium