7 min read
This study guide covers long-run adjustments in macroeconomics, focusing on how the economy self-corrects to full-employment output. Key concepts include economic shocks, recessionary and inflationary gaps, and the role of price adjustments and wage flexibility in the self-correction process. The guide also explains the effects of shifts in aggregate demand (AD) and short-run aggregate supply (SRAS). Practice questions and exam tips are provided.
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Question 1 of 10
The economy is in long-run equilibrium when the aggregate demand (AD), short-run aggregate supply (SRAS), and long-run aggregate supply (LRAS) curves intersect. Which of the following is also true at this point? 🤔
The economy is experiencing an inflationary gap
The economy is at full employment output
Unemployment is higher than the natural rate
The economy is experiencing a recessionary gap