Which of the following statements is true about the economy in the long run?
A) Equilibrium output is below potential GDP and the rate of unemployment exceeds the natural rate.
B) Production costs are close to zero in the long run.
C) The rate of unemployment is zero in the long run.
D) The aggregate demand curve plays no role in determining the equilibrium level of real GDP.
E) The aggregate supply curve is a horizontal line.

Question

Quizplus · Accepted Answer

In the long run, the economy is expected to adjust to its potential output, where the aggregate supply curve is vertical at the natural level of output. This implies that changes in aggregate demand do not affect the equilibrium level of real GDP in the long run, but rather influence the price level.

Which of the Following Statements Is True About the Economy