In the macroeconomic long run,
A) GDP always is below potential GDP.
B) there is full employment with no unemployment.
C) output always is above potential GDP.
D) there is full employment and real GDP is equal to potential GDP.

Question

Quizplus · Accepted Answer

In the macroeconomic long run, the economy will reach its potential or full employment level of output. This means there is no cyclical unemployment and real GDP is equal to potential GDP. Therefore, D is the correct choice. A is incorrect because potential GDP is the maximum level of output an economy can produce, and it is not always lower than actual GDP. B and C are also incorrect because full employment means there is no cyclical unemployment, but it does not necessarily mean that output is always above potential GDP.

In the Macroeconomic Long Run