Which of these does not hold true if an economy is simultaneously in long-run and short-run equilibrium?
A)The actual price level equals the expected price level.
B)Aggregate quantity supplied equals potential output.
C)Aggregate quantity demanded equals potential output.
D)Aggregate quantity supplied equals aggregate quantity demanded.
E)Aggregate demand curve is horizontal at the potential output level.

Question

Quizplus · Accepted Answer

If an economy is in both long-run and short-run equilibrium, it means that aggregate quantity supplied equals aggregate quantity demanded, potential output is being produced, and the actual price level equals the expected price level. However, the aggregate demand curve is not necessarily horizontal at the potential output level in this case. The AD curve can have any slope as long as it intersects with the short-run aggregate supply curve at the same point where potential output is being produced.

Which of These Does Not Hold True If an Economy