An economy is characterized by the AD equation P = 300 - 0.02Y,SRAS equation P = 100 and LRAS equation Y* = 5,000.In the absence of any change in policy or exogenous shocks,this economy will achieve a long-run price level of

Question

Quizplus · Accepted Answer

In the long run, the economy will produce at its potential output level (Y* = 5,000). Substituting Y = 5,000 into the AD equation: P = 300 - 0.02(5,000) = 300 - 100 = 200.

An Economy Is Characterized by the AD Equation P =