If the economy is in long-run equilibrium:
A) inflation should be accelerating.
B) current output should be greater than potential output.
C) current inflation should equal expected inflation.
D) current inflation should be less than expected inflation.

Question

Quizplus · Accepted Answer

In long-run equilibrium, the economy is producing at its potential output, and there is no upward or downward pressure on the price level. As a result, current inflation should be equal to expected inflation, as there are no surprises or unanticipated changes in the economy that could cause inflation to deviate from expected levels.

If the Economy Is in Long-Run Equilibrium