The economy is in long-run equilibrium when:
A) aggregate demand intersects short-run aggregate supply.
B) short-run aggregate supply intersects long-run aggregate supply.
C) aggregate demand intersects long-run aggregate supply.
D) aggregate demand intersects both long-run and short-run aggregate supply.
E) the economy is at full employment output.

Question

Quizplus · Accepted Answer

In long-run equilibrium, aggregate demand intersects both the short-run and long-run aggregate supply curves, indicating that the economy is operating at full employment output without inflationary or recessionary gaps.

The Economy Is in Long-Run Equilibrium When