If the Economy Is in Short-Run Equilibrium but Not in Long-Run

question 65

Multiple Choice

If the economy is in short-run equilibrium but not in long-run equilibrium, what forces cause the economy to return to long-run equilibrium?

• A)Input prices change, causing the short-run aggregate supply curve to shift.
• B)The long-run aggregate supply curve shifts until long-run equilibrium is restored.
• C)The aggregate demand curve shifts, causing price changes that restore long-run equilibrium.
• D)None of the above is correct.

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Definitions:

Security Selection

The process of choosing individual stocks or bonds to invest in, based on analysis and research, aiming to achieve better returns than the broader market.

Asset Allocation

The strategy of distributing investments among various financial categories to manage risk and optimize returns.

Investment Committee

An investment committee is a group of professionals responsible for making decisions regarding the investment strategy of an organization or fund.

Passively Managed

Investment strategies that aim to replicate the performance of a specific index or benchmark as closely as possible, without active decision-making by managers.