When actual output equals potential output and the inflation rate is stable,the economy is said to be in ________ equilibrium.
A) contractionary
B) recessionary
C) expansionary
D) short-run
E) long-run

Question

Quizplus · Accepted Answer

When actual output equals potential output, the economy is said to be in long-run equilibrium. At this point, there is no pressure on prices or wages to either rise or fall, which results in a stable inflation rate.

When Actual Output Equals Potential Output and the Inflation Rate