Which of the following statements is correct?
A)In the long run, output is determined by the amount of capital, labor, and technology; the interest rate adjusts to balance the supply and demand for money; the price level adjusts to balance the supply and demand for loanable funds.
B)In the long run, output is determined by the amount of capital, labor, and technology; the interest rate adjusts to balance the supply and demand for loanable funds; the price level adjusts to balance the supply and demand for money.
C)In the long run, output is determined by the amount of capital, labor, and technology; the interest rate adjusts to balance the supply and demand for loanable funds; the price level is stuck.
D)In the long run, output responds to the aggregate demand for goods and services; the interest rate adjusts to balance the supply and demand for loanable funds; the price level adjusts to balance the supply and demand for money.

Question

Quizplus · Accepted Answer

In the long run, output is determined by the amount of capital, labor, and technology; the interest rate adjusts to balance the supply and demand for loanable funds; the price level adjusts to balance the supply and demand for money. This statement is correct because in the long run, capital, labor, and technology determine the potential level of output. The interest rate adjusts to balance the supply and demand for loanable funds, which affects investment and ultimately affects output. The price level adjusts to balance the supply and demand for money since money supply affects prices. So, option B is the correct choice.

Which of the Following Statements Is Correct