Using the IS curve
,in the long run,
__________ and __________,so that __________.
A)equals one; ;the economy is in recession
B)is greater than one; ;the economy is at its long-run equilibrium
C)equals zero; ;the economy is at its long-run equilibrium
D)equals one; ;the economy is expanding
E)equals one; ;the economy is in recession

Question

Using the IS curve 
,in the long run, 
__________ and __________,so that __________.
A)equals one; ;the economy is in recession 
B)is greater than one; ;the economy is at its long-run equilibrium 
C)equals zero; ;the economy is at its long-run equilibrium 
D)equals one; ;the economy is expanding 
E)equals one; ;the economy is in recession

Quizplus · Accepted Answer

In the long run, the IS curve shifts until it intersects with the vertical line representing potential output (Yp) at the natural rate of unemployment, which occurs when the economy is at its long-run equilibrium. At that point, the IS curve becomes vertical and the value of the multiplier falls to zero. Therefore, in the long run, the IS curve equals zero and the economy is at its long-run equilibrium.

Using the IS Curve