In long-run equilibrium in the AD-AS model,which of the following is true?

Question

Quizplus · Accepted Answer

In long-run equilibrium, the economy operates at potential output, denoted by Y*, which represents the maximum sustainable output level given the economy's resources and technology. This implies that actual output (Y) is equal to potential output (Y*), so (A) is the correct answer. Option (B) and (E) imply that the economy is producing above potential, which is unsustainable in the long run and will result in inflationary pressures. Option (C) implies that the economy is producing below potential, which is inefficient and lowers economic welfare. Option (D) is not a valid answer choice.

In Long-Run Equilibrium in the AD-AS Model,which of the Following