When all prices (including wages) have fully adjusted to previous shifts in aggregate supply or demand and the flow of spending, saving, borrowing, and lending will continue until something else changes, this is called
A)the substitution-of-foreign-goods effect.
B)the wealth effect or real-balances effect.
C)the constant nominal income effect.
D)long-run equilibrium.

Question

Quizplus · Accepted Answer

When all prices, including wages, have fully adjusted to previous shifts in aggregate supply or demand and the flow of spending, saving, borrowing, and lending will continue until something else changes, this is called long-run equilibrium. In the long run, the economy will settle into a steady state where all factors of production are being used efficiently, and the economy will experience full employment output.

When All Prices (Including Wages) Have Fully Adjusted to Previous