Long-run full-employment equilibrium assumes:
A) a downward-sloping production function.
B) a downward-sloping long-run supply curve (LRAS).
C) the CPI index price level equals the equilibrium wage rate.
D) the CPI equals aggregate demand (AD) equals short-run aggregate supply (SRAS) equals long-run aggregate supply (LRAS).

Question

Long-run full-employment equilibrium assumes:
A) ​a downward-sloping production function.
B) ​a downward-sloping long-run supply curve (LRAS).
C) ​the CPI index price level equals the equilibrium wage rate.
D) ​the CPI equals aggregate demand (AD) equals short-run aggregate supply (SRAS) equals long-run aggregate supply (LRAS).
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Quizplus · Accepted Answer

In long-run full-employment equilibrium, the economy's output is at its potential level, meaning that aggregate demand (AD), short-run aggregate supply (SRAS), and long-run aggregate supply (LRAS) are all equal. This equilibrium reflects a state where the economy is producing at its full capacity, and price levels are stable.

Long-Run Full-Employment Equilibrium Assumes