Use the Following to Answer Questions

question 95

Multiple Choice

Use the following to answer questions .
Exhibit: Long-run Equilibrium
-(Exhibit: Long-run Equilibrium) Based on the figure, we can conclude that

• A) in the short run, the economy will always achieve full-employment equilibrium.
• B) in the long run, given flexible wages and prices, the economy will achieve equilibrium at its potential output level.
• C) flexible wages and prices are irrelevant since the LRAS curve is vertical.
• D) in the long run, the aggregate demand curve determines the potential output level.

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