Which of the following occurs in the long run?
A) Prices are sticky.
B) Unexpected inflation is absent.
C) The SRAS curve intersects the AD curve at an output growth rate higher than the Solow growth rate.
D) Workers confuse real wages with nominal wages.

Question

Quizplus · Accepted Answer

In the long run, unexpected inflation is absent due to the neutrality of money, which means that changes in the supply of money only affect the nominal variables, such as prices and wages, but not the real variables, such as output and employment. Therefore, in the long run, inflation rate is determined by the growth rate of the money supply, and expected inflation equals actual inflation.

Which of the Following Occurs in the Long Run