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An Economy Is in Long-Run Equilibrium When Output Equals Potential

question 80

Essay

An economy is in long-run equilibrium when output equals potential output.Why is there no long-run equilibrium rate of "potential inflation"?


Definitions:

Prices Rise

An economic condition where the cost of goods and services increases over time, affecting purchasing power.

Suppliers Expect

Anticipations or predictions made by suppliers about future market conditions that can affect production decisions.

Equilibrium Price

The price at which the quantity of a good or service demanded by consumers equals the quantity supplied by producers, leading to market stability.

Equilibrium Quantity

The amount of products or services that are offered and sought after at the balanced market price.

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