In Long-Run Macroeconomic Equilibrium, the

question 107

Multiple Choice

In long-run macroeconomic equilibrium, the

• A) long-run aggregate supply curve has shifted so that potential GDP equals real GDP.
• B) aggregate demand curve adjusts to the point where the long-run aggregate supply curve and the short-run aggregate supply curve intersect.
• C) real wage rate has adjusted so that the economy is on the short-run aggregate supply curve but not on the long-run aggregate supply curve.
• D) None of the above answers is correct.

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Definitions:

Risk Averse

Describing individuals or entities that prefer to avoid risk and would rather choose an alternative with a more certain but possibly lower return, than an option with a higher but uncertain return.

Utility Function

A mathematical representation that relates an individual’s consumption bundle to the level of satisfaction or utility derived from it.

Marginal Utility

The additional satisfaction or utility gained from consuming or using one more unit of a good or service.

Interest Rate

The percentage of a sum of money charged for its use, which can be seen as the cost of borrowing money or the return on saving.