The economy is in long-run equilibrium only when the short run aggregate supply curve intersects the aggregate demand curve along the long run aggregate supply curve.

Question

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In long-run equilibrium, the economy is operating at its potential output and the price level is stable. This occurs when the short-run aggregate supply curve intersects the aggregate demand curve at a point that is also on the long-run aggregate supply curve. This is because in the long run, prices and wages have adjusted to their equilibrium levels, and the economy has reached its natural rate of output.

The Economy Is in Long-Run Equilibrium Only When the Short