Within the Framework of the AD/AS Model, If a Long-Run

question 14

Multiple Choice

Within the framework of the AD/AS model, if a long-run equilibrium is present in the goods and services market,

• A) decision makers will have accurately forecast the current price level when they arrived at resource price and loanable funds agreements.
• B) the profit rates of the firms will generally exceed the competitive level.
• C) the actual rate of unemployment will fall below the natural rate of unemployment.
• D) the current rate of output will be sustainable in the future.
• E) both a and d are correct.

---

Definitions:

Capital Required

The total amount of financial resources needed to fund a business’s operations and investments, including starting costs, assets, and working capital.

Natural Resources

Materials or substances occurring in nature which can be exploited for economic gain, including water, minerals, forests, and fossil fuels.

Worker Productivity

The measure of the output of goods or services produced by an employee within a given time frame.

Worker Preferences

The desires or priorities of employees regarding their job conditions, salary, environment, and other job-related factors.