When an economy is in long run equilibrium,
A) it will be impossible to sustain the current rate of output in the future.
B) the interest rate will decline.
C) the foreign exchange value of the dollar will tend to appreciate.
D) the actual and natural rates of unemployment will be equal.

Question

Quizplus · Accepted Answer

In long run equilibrium, the economy will be producing at its potential output level, which means that there will be no cyclical unemployment. The actual and natural rates of unemployment will be equal, and there will be no systematic pressure for prices or wages to change. Therefore, option D is the correct choice. The other options (A, B, and C) are not necessarily true in the long-run equilibrium.

When an Economy Is in Long Run Equilibrium