The full-employment rate of output can
A) be surpassed in the long run only if input prices are flexible.
B) not be surpassed in either the short run or the long run.
C) be surpassed only when firms are not yet producing at full capacity.
D) be surpassed only in the short run.

Question

Quizplus · Accepted Answer

The full-employment rate of output can be surpassed only in the short run because in the long run, input prices will adjust and bring the economy back to full employment equilibrium. In the short run, however, firms may be able to produce beyond their full capacity by utilizing their existing resources more intensively or hiring additional workers at current input prices.

The Full-Employment Rate of Output Can