Long-run macroeconomic equilibrium occurs when
A)aggregate demand equals short-run aggregate supply.
B)aggregate demand equals short-run aggregate supply and they intersect at a point on the long-run supply curve.
C)structural and frictional unemployment equals zero.
D)output is above potential GDP.
E)there is no pressure on the price level to change.

Question

Quizplus · Accepted Answer

Long-run macroeconomic equilibrium occurs when aggregate demand equals short-run aggregate supply and they intersect at a point on the long-run supply curve. This represents a situation where the economy is producing at potential GDP and there is no pressure on the price level to change. Structural and frictional unemployment may still exist in this situation. Output above potential GDP would not represent equilibrium, while option A only represents a short-run equilibrium.

Long-Run Macroeconomic Equilibrium Occurs When