Following any AD or AS shock, economists typically assume that the adjustment process continues until
A)the output gap is at a stable level.
B)factor prices have returned to their levels previous to the shock.
C)Y* adjusts to its long- run equilibrium level.
D)the AD and AS curves intersect each other at the correct price level.
E)real GDP returns to Y*.

Question

Quizplus · Accepted Answer

Economists assume that after a shock, the economy will adjust until real GDP returns to its potential level, Y*, which represents the long-run equilibrium.

Following Any AD or AS Shock, Economists Typically Assume That