At long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, which variables will be at their natural levels?
A) inflation and output
B) real and nominal interest rates
C) inflation and the nominal interest rate
D) output and the real interest rate

Question

Quizplus · Accepted Answer

In the long-run equilibrium of the dynamic model of aggregate demand and aggregate supply, output and the real interest rate will be at their natural levels. Inflation and nominal interest rates may deviate from their natural levels due to short-run fluctuations, but in the long-run, they will also be at their natural levels determined by factors such as productivity, technology, and the supply of money.

At Long-Run Equilibrium in the Dynamic Model of Aggregate Demand