Long-run equilibrium occurs in the dynamic model of aggregate demand and aggregate supply when:
A) dynamic aggregate demand equals dynamic aggregate supply.
B) there are no shocks and inflation is stable.
C) the demand shock equals the supply shock.
D) the nominal interest rate equals the real interest rate.

Question

Quizplus · Accepted Answer

In the long-run equilibrium of the dynamic model of aggregate demand and aggregate supply, there are no shocks affecting the economy, and inflation is stable, indicating that the economy is at a steady state.

Long-Run Equilibrium Occurs in the Dynamic Model of Aggregate Demand