In the Long Run, an Economy Will Produce Its Potential

question 122

Multiple Choice

In the long run, an economy will produce its potential output if _____

• A) workers mistakenly believe that nominal wages equal real wages.
• B) the expectations of workers and firms are the same in the long run and the short run.
• C) wages and prices are sufficiently flexible.
• D) the price level is high.
• E) the price level is low.

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Definitions:

Expectancy Theory

A motivational theory suggesting that individuals are motivated to act in certain ways based on the expectation that their actions will lead to desired outcomes.

Living Standards

Living standards refer to the level of wealth, comfort, material goods, and necessities available to a person or community.

Psychological Needs

The fundamental emotional or mental requirements that individuals need to achieve well-being and contentment.

Autonomous Motivation

The drive to engage in an activity out of genuine interest or internal value, rather than external pressures or demands.