In the AD/AS framework, when the economy is in long-run equilibrium,
A) inflation is occurring.
B) the entire labor force is employed.
C) actual prices are equal to expected prices.
D) actual levels of income and employment are less than the natural levels of income and Employment.

Question

Quizplus · Accepted Answer

Long-run equilibrium refers to the point at which actual prices are equal to expected prices. In this state, there is neither inflation nor recession occurring. The entire labor force being employed or actual levels of income and employment being less than natural levels is not necessarily a characteristic of long-run equilibrium.

In the AD/AS Framework, When the Economy Is in Long-Run