When a Country Is in Equilibrium on Its Long-Run Aggregate

question 27

Multiple Choice

When a country is in equilibrium on its long-run aggregate supply curve, the actual price level facing economic agents

• A) is greater than the price level expected by economic agents.
• B) is equal to the price level expected by economic agents.
• C) is less than the price level expected by economic agents.
• D) is greater than, equal to, or less than the price level expected by economic agents - Cannot be determined without more information.

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Definitions:

Aggregate Demand

The sum of all demand for products and services in an economy, indicating the total spending on goods and services at each price level.

Equilibrium Output

The level of output at which the quantity of goods produced equals the quantity of goods consumed in an economy, with no external pressures to change.

Short-Run Aggregate Supply Curve

A graphical representation showing the positive relationship between the total production of goods and services (aggregate supply) and the price level in the short term.

Expansionary Gap

A situation where the real GDP is higher than the potential GDP, often leading to inflationary pressures as demand outstrips supply.