The economy moves from a short- run equilibrium to the long- run equilibrium through:
A) improvements in technology.
B) demand shocks.
C) adjustments in wages and prices.
D) supply shocks.

Question

Quizplus · Accepted Answer

Adjustments in wages and prices allow the economy to reach the long-run equilibrium where the aggregate supply curve intersects with the aggregate demand curve at potential GDP. Improvements in technology and supply/demand shocks can affect the short-run equilibrium, but do not necessarily lead to a shift to the long-run equilibrium.

The Economy Moves from a Short- Run Equilibrium to the Long-