Which of the following statements is true?
A) The long-run aggregate supply (LRAS)curve shows the Real GDP the economy is prepared to supply at different price levels,assuming wage rates and all other resource prices have fully adjusted to eliminate a recessionary or inflationary gap.
B) Laissez-faire is a government policy of raising aggregate demand in order to eliminate a recessionary gap.
C) An economy can operate beyond its physical PPF,but not beyond its institutional PPF.
D) If the economy is self-regulating,it is always in long-run equilibrium.
E) a and c

Question

Quizplus · Accepted Answer

The statement accurately describes the LRAS curve, which represents long-run equilibrium in the economy where all prices have had time to fully adjust. Laissez-faire refers to a government policy of minimal intervention, and is not related to raising aggregate demand. An economy cannot operate beyond its physical PPF, but it can operate beyond its institutional PPF if there are inefficiencies or government regulations. Even if the economy is self-regulating, short-run fluctuations can still occur and disrupt the equilibrium. Therefore, statement D is incorrect. Choice E is partially correct but not the best answer since it includes a false statement.

Which of the Following Statements Is True