The macroeconomy is said to be in long-run equilibrium only if
A) the resource, loanable funds, foreign exchange, and goods and services markets are all in equilibrium.
B) prices were incorrectly estimated by decision makers.
C) the output of the economy exceeds the full-employment level of output.
D) the economy is operating along its short-run aggregate supply curve.

Question

Quizplus · Accepted Answer

Long-run equilibrium in the macroeconomy occurs only when all markets (resource, loanable funds, foreign exchange, and goods and services) are in equilibrium. This means that the economy is operating at its potential output level and there are no imbalances in any of the markets. Prices play a role in this equilibrium but are not the sole factor determining it. The output exceeding the full-employment level or operating along the short-run aggregate supply curve do not necessarily signify long-run equilibrium.

The Macroeconomy Is Said to Be in Long-Run Equilibrium Only