Why is the economy at full employment in the long run?
A) Only wages have the ability to adjust.
B) Only price can adjust.
C) Prices don't adjust.
D) Wages and the price level eventually adjust to full employment equilibrium levels.
E) Government policies eventually converge on the full employment strategy.

Question

Quizplus · Accepted Answer

In the long run, both wages and price level can adjust, but eventually, they will adjust to the point where the economy is at full employment equilibrium levels. This means that there is no cyclical unemployment or demand-deficient unemployment in the economy, and all available resources are being utilized efficiently.

Why Is the Economy at Full Employment in the Long