When an economy is operating on its long-run aggregate supply curve,
A)the actual inflation rate is greater than the anticipated inflation rate.
B)the actual unemployment rate equals the natural unemployment rate.
C)unemployment will fall to an unusually low rate that is not likely to last into the future.
D)real GDP demanded exceeds real GDP supplied.
E)inflation must be positive.

Question

Quizplus · Accepted Answer

Operating on the long-run aggregate supply curve means that the economy is producing at its potential level, which corresponds to the natural unemployment rate (the rate of unemployment consistent with stable inflation). Other options are not necessarily true when the economy is on its long-run aggregate supply curve.

When an Economy Is Operating on Its Long-Run Aggregate Supply