11.5 The Long-Run AS Curve
Refer to the information provided in Figure 11.7 below to answer the questions that follow. Figure 11.7
-Refer to Figure 11.7. Which of the following statements characterizes an output level of $400 billion?
A) It is sustainable over the long run without unemployment or deflation.
B) It is achievable only in the long run.
C) It is attainable in the short run but it is associated with decreases in the price level.
D) It can be achieved only if investment is independent of the interest rate.

Question

11.5 The Long-Run AS Curve
Refer to the information provided in Figure 11.7 below to answer the questions that follow.  Figure 11.7
-Refer to Figure 11.7. Which of the following statements characterizes an output level of $400 billion?
A) It is sustainable over the long run without unemployment or deflation. 
B) It is achievable only in the long run. 
C) It is attainable in the short run but it is associated with decreases in the price level. 
D) It can be achieved only if investment is independent of the interest rate.

Quizplus · Accepted Answer

At an output level of $400 billion, the economy might be operating below its potential output level, leading to short-term adjustments like decreases in the price level to stimulate demand and move towards equilibrium. This scenario does not necessarily imply long-term sustainability (A), exclusivity to the long run (B), or a condition where investment is unaffected by interest rates (D).

11.5 the Long-Run AS Curve