At a short-run equilibrium output equals ________, while at a long-run equilibrium output equals ________.
A)potential output; an output level consistent with the inflation rate
B)an output level consistent with the inflation rate; potential output
C)the monetary policy reaction function; aggregate demand
D)aggregate demand; the monetary policy reaction function

Question

Quizplus · Accepted Answer

Short-run equilibrium is a situation in which inflation equals the value determined by past expectations and pricing decisions and output equals the level of short-run equilibrium output that is consistent with that inflation rate. Long-run equilibrium, on the other hand, is a situation in which actual output equals potential output.

At a Short-Run Equilibrium Output Equals ________, While at a Long-Run