Long-run equilibrium occurs where:
A)real output is greater than potential output.
B)the vertical long-run aggregate supply curve, and short-run aggregate supply curve intersect.
C)the aggregate demand curve, and short-run aggregate supply curve intersect
D)the aggregate demand curve, vertical long-run aggregate supply curve, and short-run aggregate supply curve all intersect.

Question

Quizplus · Accepted Answer

Long-run equilibrium occurs where the aggregate demand curve, vertical long-run aggregate supply curve, and short-run aggregate supply curve all intersect. This is the point where the economy is producing at potential output and the price level has adjusted to match the economy's productive capacity. At this level, there is no excess demand or supply in the economy, and there is no pressure for prices to rise or fall.

Long-Run Equilibrium Occurs Where