Which of the following is a defining assumption of the AD/AS macro model in the long run?
A)Factor supplies are assumed to be fixed.
B)Technology used in production is constant.
C)The level of potential output is constant.
D)Factor prices are assumed to be fixed.
E)Changes in real GDP are determined by the changes in potential output.

Question

Quizplus · Accepted Answer

In the long run, the AD/AS model assumes that changes in real GDP are determined by changes in potential output, as the economy is at full employment and output is at its potential level.

Which of the Following Is a Defining Assumption of the AD/AS