In the long run,an economy will produce its potential output if:
A)workers mistakenly believe that nominal wages equal real wages.
B)the expectations of workers and firms are the same in the long and short run.
C)wages and prices are sufficiently flexible.
D)the price level is high.
E)the price level is low.

Question

Quizplus · Accepted Answer

Flexible wages and prices allow the economy to adjust to changes in supply and demand, allowing production to reach its potential output. A, B, D, and E do not directly address the ability of the economy to produce its potential output.

In the Long Run,an Economy Will Produce Its Potential Output