Equilibrium in the long run occurs when
A) AD intersects the short-run AS, regardless of output level.
B) AD intersects the short-run AS, regardless of price level.
C) AD intersects the short-run and the long-run AS curves at the same point.
D) the short-run AS curve intersects the long-run AS curve.

Question

Quizplus · Accepted Answer

Equilibrium in the long run occurs when AD intersects both the short-run and the long-run AS curves at the same point. This is because in the long run, prices and wages are flexible, and adjustments have been made to the economy so that it operates at its potential level of output. Therefore, the economy is able to produce at its natural rate of unemployment without any excess demand or supply pressures in the market.

Equilibrium in the Long Run Occurs When