In the long run

Name: In the long run
Brand: Quizplus
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Question

In the long run

Quizplus · Accepted Answer

In the long run, the economy will reach its potential output level where all resources are fully utilized, leading to the equality of real GDP with potential GDP. This happens due to the flexibility of prices and wages, which adjust to eliminate any short-run imbalances in the economy. Therefore, in the long run, the economy operates on its LRAS (long-run aggregate supply) curve, which coincides with potential GDP.

In the Long Run