Use the figure below to answer the following questions.
Figure 10.3.1
-Refer to Figure 10.3.1.The economy automatically adjusts to a long- run equilibrium.At the long- run macroeconomic equilibrium,
A)the price level is 70.
B)real GDP is $440 billion.
C)actual unemployment exceeds the natural unemployment rate.
D)potential GDP is greater than in the short run.
E)Both A and B

Question

Use the figure below to answer the following questions.
  Figure 10.3.1
-Refer to Figure 10.3.1.The economy automatically adjusts to a long- run equilibrium.At the long- run macroeconomic equilibrium,
A)the price level is 70. 
B)real GDP is $440 billion. 
C)actual unemployment exceeds the natural unemployment rate. 
D)potential GDP is greater than in the short run. 
E)Both A and B

Quizplus · Accepted Answer

At the long-run equilibrium, both the price level and real GDP are fixed. In the given figure, the intersection of the long-run aggregate supply (LRAS) and aggregate demand (AD) curve occurs at a price level of 70 and real GDP of $440 billion. Therefore, option A and B are correct. At the long-run equilibrium, actual unemployment equals the natural unemployment rate, which means the economy is at a full-employment level. So, option C is incorrect. The potential GDP is not greater in the long run compared to the short run. The potential GDP is the same in both the short and the long run. Therefore, option D is incorrect.

Use the Figure Below to Answer the Following Questions