Long-run equilibrium in the goods and services market requires that
A) aggregate supply equals aggregate demand and that decision makers correctly anticipate the level of prices.
B) the unemployment rate is zero.
C) prices are neither increasing nor decreasing.
D) aggregate supply be larger than aggregate demand.

Question

Quizplus · Accepted Answer

Long-run equilibrium in the goods and services market occurs when aggregate supply equals aggregate demand and decision makers correctly anticipate the level of prices. Prices may be increasing or decreasing in the short-run, but in the long-run, they will adjust to maintain this equilibrium. The unemployment rate may or may not be zero in this equilibrium. Option D is incorrect, as aggregate supply cannot be larger than aggregate demand in equilibrium.

Long-Run Equilibrium in the Goods and Services Market Requires That