When an economy is operating on its long- run aggregate supply curve,
A)the actual unemployment rate equals the natural unemployment rate.
B)real GDP demanded exceeds real GDP supplied.
C)the actual inflation rate is greater than the expected inflation rate.
D)the unemployment rate is less than the natural unemployment rate.
E)inflation must be positive.

Question

Quizplus · Accepted Answer

When an economy is on its long-run aggregate supply curve, it means that the economy is producing at its potential output level. This level of output is also known as the natural level of output, which is determined by the economy's factors of production and technology. At this level of output, the economy's actual unemployment rate would equal its natural unemployment rate, which is the unemployment rate that exists when the labor market is in equilibrium. Therefore, choice A is the correct answer.

When an Economy Is Operating on Its Long- Run Aggregate