Use the figure below to answer the following questions.

Figure 26.3.1
-Refer to Figure 26.3.1. If Econoworld automatically adjusts to a long-run equilibrium, then in the long-run macroeconomic equilibrium,
A)the price level is 70.
B)real GDP is $440 billion.
C)actual unemployment exceeds the natural unemployment rate.
D)potential GDP is greater than in the short run.
E)Both A and B

Question

Use the figure below to answer the following questions.
  
Figure 26.3.1
-Refer to Figure 26.3.1. If Econoworld automatically adjusts to a long-run equilibrium, then in the long-run macroeconomic equilibrium,
A)the price level is 70. 
B)real GDP is $440 billion. 
C)actual unemployment exceeds the natural unemployment rate. 
D)potential GDP is greater than in the short run. 
E)Both A and B

Quizplus · Accepted Answer

In the long-run macroeconomic equilibrium, both the price level and real GDP will adjust to their long-run levels. According to the figure, the long-run equilibrium occurs at the intersection of ADLR and SRASLR, which corresponds to a price level of 70 and real GDP of $440 billion. Therefore, both choices A and B are correct. Choice C is incorrect because in the long run, unemployment will be at its natural rate. Choice D is incorrect because potential GDP is the same in the short and long run.

Use the Figure Below to Answer the Following Questions